Human Resources Committee on May 9th, 2023

[Jenny Kwan, NDP, Vancouver East, BC]

—that it should be something the federal government—

[The Chair, Liberal, Bobby Morrissey]

Ms. Kwan, your time is up.

That concludes the first six-minute round.

Madame Chabot has her hand up.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

We're being called to a vote when we're about to start the second round of questions. I'm concerned because the second round will also be shortened. I'd have liked to finish the round of questions with Mrs. Houle, and I think it's important we use the time needed with the experts in the second round.

If we can't finish our business today, then I hope we can have an extra meeting to do so.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Chabot.

Did you have your hand up, Mrs. Gray?

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

On where we're at, another vote has now been called in the middle of our committee meeting. We have to leave immediately to head to the House to vote. By the time we're back, it's going to be close to 5:30, because the vote is at about 10 minutes after five. It will take that much time to vote and then get back here. We'll be back here at, like, 5:29, and the committee goes until 5:30.

[The Chair, Liberal, Bobby Morrissey]

We can go to six. We have resources to go until six. The rules allow us to do that if there are two members of the opposition present and I have a quorum. It would be my intention when members return to continue the meeting until six o'clock, Mrs. Gray.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Well, if that's your intention, we wouldn't necessarily support it due to other commitments we have. These two votes have thrown everything off, so it might be better to continue this at another meeting.

[The Chair, Liberal, Bobby Morrissey]

Well, again, I would take direction from the committee as a whole.

Ms. Kwan, you have your hand up.

[Jenny Kwan, NDP, Vancouver East, BC]

I do. Thank you very much, Mr. Chair.

I'm fine to go until six o'clock. However, I do want to note that it cuts off the presentation and questions for both panels. Given the situation and the importance of this work, I would support Ms. Chabot's suggestion that the housing advocate, Ms. Houle, be invited back for another hour so that we can more fully engage with her with respect to this important issue.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Kwan.

We can discuss that. Right now, the schedule is set for today, so it would be my intention to suspend until the vote is recorded. Then we would resume with the second panel when they're ready to go. Then the committee can, by majority, choose its future direction.

We can consider the point you raise, Ms. Kwan, as well as Madam Chabot's.

At this moment, we are suspended. We will resume with the second witness list following the vote in the House of Commons. We'll suspend until the vote is conducted in the House and members have had the allotted time to get back to the committee.

[The Chair, Liberal, Bobby Morrissey]

I will reconvene the meeting for the second hour of witnesses. We have a hard stop at six o'clock, and we have six witnesses, five with opening statements.

With that, I want to welcome, as individuals, Dr. Martine August, associate professor, school of planning, University of Waterloo; Jackie Brown, researcher; and Manuel Gabarre, researcher. They are appearing via video conference. We also have, as an individual, Dr. Nemoy Lewis, assistant professor, Toronto Metropolitan University, who is in the room with us. From ACORN Canada, we have Tanya Burkart, leader, and Dr. Bhumika Jhamb, research and communications coordinator.

I will just advise that we only have 30 minutes left of committee time. I will ask you to respect the five-minute timeline on the opening statements. The committee will make a decision on whether it's going to invite the witnesses back for questioning following this meeting. At this time, I anticipate we're only going to get through the opening statements.

We will begin with Dr. August for five minutes.

[Dr. Martine August, Associate Professor, School of Planning, University of Waterloo, As an Individual]

Hi. Thanks to the committee for inviting me here today.

My name is Martine August, and I'm an associate professor at the University of Waterloo. I'm also the lead for a series of reports commissioned by the advocate on the financialization of housing. I'm here today with the authors of these reports.

We've already been introduced today to the trend of financialization. This refers to the growing role of finance capital and the workings of the global economy in recent decades. This trend is associated with a rise in global and social inequality.

The financialization of housing refers to the treatment of housing as an investment vehicle. It involves the acquisition of mortgages or housing itself by financial firms and by investment vehicles. These are things like real estate investment trusts, or REITs. With this acquisition, they transform housing into a product for investors and provide new access for investors to profits through housing.

In Canada, as the advocate mentioned, this trend is on the rise. Since the 1990s, we've seen the massive consolidation of the ownership of apartments by financial firms. The top 25 biggest financial firms—I'm talking about real estate investment trusts, private equity institutions and asset managers—collectively own 350,000 apartment suites. This is about 20% of Canada's purpose-built rental housing with over six units. This is just an estimate. It doesn't include all financial firms, just the top 25, and it's limited by the lack of transparent data on ownership in this country, as referenced in the last session.

Why does this shift in ownership matter?

Financial owners differ in how they treat buildings because they have a very particular business goal, which is to maximize value for their shareholders. The managers of financial vehicles are structurally incentivized to drive value for investors. If they do not prioritize their levels of return, they will lose share value, they will lose investors and they will reduce executive compensation, which is often tied to performance. This means that in operating housing, financial firms elevate profits above other goals, such as goals for affordability and enhancing tenant quality of life. They instead treat housing as a financial asset.

In order to chase perpetual returns, financial firms often use aggressive property management strategies, which can reduce security of tenure and reduce affordability. They therefore run counter to the realization of the right to housing in Canada.

In multi-family housing, one main approach that these companies use is called “repositioning”, in which buildings are repositioned to make more money for investors. In order to do this, firms can reduce their expenses. This can sometimes negatively affect tenants if it involves cost-cutting or firing superintendents. They can also raise revenues, and raising revenues ultimately comes from the pockets of tenants. They charge more for amenities, add on new fees and, especially, raise rents.

Firms find that they can raise rents more if they have vacant units. This drives them to systematically prefer to remove and displace existing tenants in order to try to get higher rent when the unit is vacant.

Financialization has negative effects on tenants. Displacement, which is caused by this pursuit of vacant units, is a well-documented trend that's harmful. Raising rents increases the economic burden on tenants. Also, the renovations and repairs that are used to drive those higher rents can make life very unpleasant.

All of these things generate stress, anxiety and health problems, and work against the realization of the right to housing in Canada. Beyond tenant-level effects, this trend drives gentrification and intensifies patterns of social and spatial inequality, reducing affordability in our towns and cities.

I'm sometimes asked how I can be so sure that financial firms are unique compared to other landlords. In line with other researchers in the U.S., I have found that financial firms in the city of Toronto file for evictions at higher rates than other types of landlords. It's two and a half times higher than owners of single buildings and one and a half times higher, even, than similarly large private chains.

We can see them filing more evictions after buying a building. Looking at 10 years of data, a colleague and I found that after financial firms buy a property, eviction filings triple going forward. If the previous owner filed 10 per year, financial firms filed 30 per year going forward. This is based on the analysis of 700 transactions over 10 years.

I've also found that in Toronto, financial firms charge higher levels of rent, regardless of neighbourhood and regardless of building quality. These findings show that, yes, financial firms here in Canada are driving up housing costs, worsening affordability and intensifying housing insecurity through higher levels of eviction filings. This underlines the need for federal government action to better regulate this industry, to protect tenants, to secure affordable rents and to stop the treatment of housing as a financial asset.

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Dr. August.

Now we'll go to Jackie Brown for five minutes or less.

[Jackie Brown, Researcher, As an Individual]

Good afternoon. Thank you so much for inviting me to speak before the committee today.

My name is Jackie Brown. I am a researcher with a master's degree in urban planning from York University. I have spent the last several years studying financialization, with a particular focus on seniors housing and long-term care homes.

The COVID-19 pandemic exposed deep systemic issues in long-term care. Significant change is needed, and I would argue that mitigating financialization is a key avenue of reform. Long-term care is positioned at the intersection of health care and housing, serving one of Canada's most vulnerable populations. It is thus a critical locus of financialization and poses a distinct set of risks and challenges.

I take the financialization of long-term care to refer to long-term care homes that are owned by investment vehicles such as publicly traded companies, private equity firms and pension funds, and that are treated as an asset class to maximize profits for investors.

The rise of financialized long-term care has been facilitated by a broader trend towards privatization over the last several decades. As of 2020, approximately 22% of long-term care beds in Canada were owned by financialized companies. In Ontario, the percentage of financialized beds is as high as 32%. For retirement homes, the proportion of financialized beds is even more significant.

The interests of investors are uniquely at odds with the provision of quality care and decent work in long-term care homes. In particular, financialized companies are heavily reliant on public subsidies for both day-to-day care and new home construction, yet they divert as much as they can into profits to pay their shareholders and investors. This occurs at the expense of resident and staff well-being.

A recent report showed that between 2010 and 2021, publicly traded companies Chartwell, Extendicare and Sienna Senior Living paid out a combined $2.3 billion to their shareholders. Dividend totals reached record highs in the first two years of the pandemic, even as the aforementioned companies received millions of dollars in emergency government aid. Meanwhile, several of these companies had the worst outcomes for residents.

Of the five long-term care providers in Ontario with the highest mortality rates in the first nine months of the pandemic, four were financialized. I have heard executives of these companies maintain that these dividends were paid out of resident accommodation copayment fees and revenue from other business segments. However, beyond the fact that additional government support presumably enabled companies to circumvent a drop in dividends, the funnelling of copayment fees to shareholders points to a fundamental distinction between financialized companies and other long-term care providers.

Municipal and non-profit providers reinvest all profits in their homes, and in fact often supplement government subsidies with other funding sources to raise the standard of care. The evidence shows that seniors themselves have a clear preference for non-profit homes where available. However, massive wait-lists mean that financialized companies are not forced to compete on quality of care.

It is important to examine the ways in which government policies and programs privilege financialized companies. For example, subsidies for the construction of new long-term care homes in Ontario are typically paid out retroactively over a period of 25 years after a home is built. This poses much more of a barrier to small non-profit providers, as financialized companies tend to have greater access to capital and can leverage existing real estate assets to secure financing with favourable terms.

Financialized companies are premised on expansion. Even as the pandemic tore through long-term care homes in 2020, investors and analysts were asking executives how they could still ensure annual growth that year. As these companies grow by acquiring and developing more homes, they come to dominate the sector even further.

I would like to highlight several opportunities for addressing this pressing issue.

First, seniors long-term care homes must be provincially licensed. Provinces are in a position to restrict the proportion of licences awarded to financialized companies. Saskatchewan has already made strides in this direction. After devastating COVID outbreaks at Extendicare's long-term care homes, including one in which 42 residents died, Saskatchewan took over all five of the company's homes in the province.

Second, there is a need for greater capacity among public and non-profit providers to make up for a reduction in financialized homes. There may be opportunities for provinces to provide planning, development and financial support so that non-profits can focus on delivering quality care in their communities.

Third, a spectrum of housing options and adequate home care services should be available to better enable seniors to age in place. This is an important area of intersection between elder care and the financialization of housing more broadly, as providing alternatives to long-term care require accessible, affordable and secure housing.

While the provision of long-term care generally falls to individual provinces and territories, the federal government can play a role, through funding agreements and financial support that are conditional on non-profit care. The federal government should also take steps to bring Revera, currently owned by the Public Sector Pension Investment Board and one of Canada's largest long-term care chains, under public ownership.

The consequences of financialization are particularly dire in the context of long-term care homes that serve some of our vulnerable seniors. We must do everything in our power to guarantee them the highest quality of care.

Thank you for your time.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Brown.

Now we go to Manuel Gabarre.

[Manuel Gabarre, Researcher, As an Individual]

Hi there. I am honoured to be here with all of you as a researcher specializing in housing financialization.

The Universal Declaration of Human Rights includes the right to housing and the right to health as part of the right to an adequate standard of living. Thus, states are accountable for ensuring both rights. Most signatory countries, including Canada, developed national public health systems and vast social housing programs after the declaration. While public health systems are still working and the administration guarantees the right to health, most states have dismantled social housing programs, and the right to housing is not in force anymore. Why?

My hypothesis is that housing became a financial product worldwide in the late seventies. In my paper, I explain how this phenomenon began with the end of the Bretton Woods system. Since then, financial products, such as mortgage-backed securities, have allowed financial investors to develop a huge market in housing and mortgages. These institutions have put pressure on governments worldwide to dismantle the social housing programs with the aim of taking advantage of a new market.

The global financial crisis challenged the housing system based on general access to home property through mortgage indebtedness. The Bank for International Settlements—the bank for central banks—acts as regulator of the commercial banking system worldwide. This institution, based in Basel, Switzerland, identified the massive granting of mortgages without guarantees, defined as subprime mortgages, as the cause of the global financial crisis.

Thus, the Bank for International Settlements established a new legal framework for mortgages, the third Basel accord, known as Basel III. All members of the Bank for International Settlements must implement their regulations, which they did in 2013. The most important norm of Basel III was the restriction on the granting of mortgages without a consistent guarantee. Thus, Basel III indirectly forced banks to grant only mortgages with a 20% loan-to-value down payment.

However, four countries dodged this restriction through public aid: Canada, U.K., New Zealand and Australia. Housing schemes follow the same pattern in these four countries. The CMHC provides mortgage loan insurance when the borrower cannot meet the standard 20% loan-to-value down payment. If a home has a value of $500,000, the borrower needs only $25,000—a 5% loan to value—instead of the $100,000—20% LTV—standard of Basel III applicable in the other countries.

Through a fallacious discourse of family protection, the Canadian government has hindered access to adequate housing. Mortgage loans make up the most significant component of household debt. Let's check the evolution of household debt in Canada after Basel III in comparison to that in other countries.

The household debt level is 80% of GDP in the U.S. In Spain it is 63%. In Ireland it is 35%. In 2013, household debt was 82% of GDP in the U.S. In Spain it was 78%. In Ireland it was 93%. Thus, household debt has dropped in these countries since the Basel III implementation in 2013, meaning it is minus 2% in the U.S. In Spain it is minus 15%, and in Ireland it is minus 58%.

As we can see, the household debt trend since 2013 is contrary to the Canadian household debt trend. Household debt has dramatically increased since 2013 at 19%, reaching 112% of GDP in 2020. From 2019 to 2020, Canadian household debt increased by 9.38% of GDP. This was the fourth-largest increase worldwide. During the years that preceded the global financial crisis, household debt never increased by more than 6% of U.S. GDP in one year.

In the paper, I have compared the Canadian housing system to the housing systems of other countries with similar socio-economic conditions: U.K., Germany, France and Austria. The conclusion is that some countries, such as Austria, which resisted the financialization of housing through the maintenance of vast social housing programs, present the best indicators in terms of access to housing, affordability and prosperity for all.

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Gabarre.

Dr. Lewis, you now have the floor for five minutes.

[Dr. Nemoy Lewis, Assistant Professor, School of Urban and Regional Planning, Toronto Metropolitan University, As an Individual]

Thank you for having me here today.

I am Dr. Nemoy Lewis and I'm an assistant professor in the school of urban and regional planning at Toronto Metropolitan University. Primarily, my work looks at the financialization of rental housing across this country, including in the cities of Toronto, Ottawa, Vancouver and Montreal. My work looks primarily at how these particular types of landlords impact the lives and neighbourhood choices of Black Canadians across this country.

To begin, what is a financialized landlord? A financialized landlord is a purchasing company that's privately held—an asset manager—or a publicly traded company—real estate investment trusts—that acquires rental properties at scale and applies financial logic, metrics and priorities to generate returns to shareholders and investors. These categories include asset managers, private equity firms, public pension funds, insurance companies and real estate investment trusts, both private and public.

Examples of asset managers are Starlight Investments and Hazelview Investments. In terms of REITs, there are CAPREIT and InterRent REIT. In terms of public pension funds, there are BCIMC, which is the investment management arm of the B.C. public pension fund and which widely invests in multi-family housing, and AIMCo, which is the investment manager of the Alberta public pension fund. Also, the federal public pension fund, PSP, invests in financial intermediaries like Starlight Investments, which acquires multi-family properties and turns these assets into profit-generating assets.

In an examination of the Toronto rental market, we examined multi-family transactions over a 27-year period, during which over 223,000 units were transacted. Financialized landlords, we've been able to document, account for 65% of those units transacted over the last 27 years in the city of Toronto. We estimate that this is most likely an undercount, because, as some of my colleagues alluded to earlier, a lot of these companies use very ambiguous corporate names and numbered companies to help conceal their true identities.

When we break down the core business practices of some of these landlords, we find that asset management firms account for 40% of those transactions over the last 27 years in the city of Toronto. Real estate investment trusts account for only 7% of those transactions. I make that statement not to vindicate REITs. REITs do apply the same acquisition and management practices, which, as we know, undermine Canada's duty to fulfill housing rights for all Canadians.

In understanding where these particular landlords are acquiring, we did a demographic analysis. We found that 6.85% of all these transactions are happening in dissemination areas where the Black population is between 50% and 80% in the city of Toronto. Those DAs actually represent only 1.1% of all DAs in the city of Toronto. Dissemination areas are the smallest standard geographic census areas that make up a census tract. Financialized landlords account for 72.86% of all those units that have been transacted in those particular geographies.

We also found that income appears to be influencing the acquisition patterns of landlords in the multi-family rental market, especially at the bottom end of the household income spectrum, where the median household income is below $76,500. Financialized landlords accounted for 66.37% of all those units in those particular dissemination areas in the city of Toronto.

We looked at this in terms of displacement problems and financialized landlords. We examined evictions in the city of Toronto over the last four years, between 2018 and 2021. There were approximately just under 63,000 evictions in the city of Toronto. Financialized landlords accounted for 42% of those evictions. In terms of evictions for non-payment of rent, financialized landlords filed just under 80% of those evictions.

We looked at one particular property that was acquired by Starlight Investments. As my colleague mentioned, once these landlords acquire these properties, there's a significant increase in evictions. In late 2018, in the north Etobicoke community of north Albion, Starlight acquired a property, and by 2019 had filed just under 500 evictions in that particular building. Ninety-five per cent of those evictions were for non-payment of rent.

When we did a demographic analysis of evictions, we found that 10% of all evictions between 2018 and 2021 were happening in DAs where the Black population is between 50% and 80%. Financialized landlords account for 73% of all of those evictions in those dissemination areas. We know that 84% of those evictions are happening in high-rise buildings, which are 10 storeys or more.

When we increased the threshold to 70%, 5% of all the evictions in the city of Toronto were happening in dissemination areas where the Black population is between 70% and 80%. Financialized landlords account for 85% of all of those evictions in those communities. Nearly 100% of those evictions—

[The Chair, Liberal, Bobby Morrissey]

Dr. Lewis.

[Dr. Nemoy Lewis]

—are happening in high-rise buildings.

Where are these evictions happening? They're happening primarily in the northwestern quadrant of the city, in communities such as the north Albion community, the Jane and Finch corridor and the Chalkfarm community, which is located northwest of the intersection of Jane and Wilson. They're also happening on the downtown eastside, including in the St. James Town corridor and the Sherbourne and Dundas area, but also in Parkdale.

When we look at income—

[The Chair, Liberal, Bobby Morrissey]

Dr. Lewis, you'll have to wrap up shortly.

[Dr. Nemoy Lewis]

This is my last bit.

When we look at income, we see that not only are these communities predominately occupied by Black Canadians, but they're of low income as well.

That's my presentation.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Dr. Lewis.

ACORN Canada, you have the floor.

[Tanya Burkart, Leader, ACORN Canada]

Good afternoon, everyone. My name is Tanya Burkart and I am an ACORN Canada leader.

ACORN is a national community union of low- and moderate-income people that fights for social and economic justice. Many ACORN members are living in rental units that are owned by financialized and big corporate landlords.

In 2021, ACORN completed a survey of 606 renters across all landlord types. Of the 606 respondents, ACORN was unable to locate who the landlord was for 36% of respondents. Many landlords hide behind property management companies or numbered companies. Often, tenants don't know who the landlord is. A high number of tenants—37%—with financialized landlords saw their landlord change in the last five years.

Of the respondents, 79% said that their unit needs some repair or urgent repair and maintenance. In addition, 16% of respondents living in units owned by financialized landlords reported they were not getting the work done on time, and 31% stated they were not getting quality work done. Some 43% of tenants in financialized housing mentioned having roaches and other pests in their buildings, and 27% of tenants who stayed more than five years said they never get quality work done.

In Ontario, 19% of tenants with financialized landlords mentioned getting above guideline rent increases, or AGIs. AGIs are commonly used by landlords to extract more money from tenants by doing cosmetic repairs.

I'm now going to speak about some lived experience of ACORN members and my own experience with financialized landlords.

A London ACORN member whose landlord is Starlight Investments said she has moved into three different units in her building since August 2013—all because of repair issues. In the latest unit, there have been electrical issues, significant plumbing issues, wall damage, roaches and bedbugs. The building has passed through three different owners: Timbercreek, Northview and Starlight. They are now doing the common areas—ripping up the carpeting and repainting the walls—so she's waiting for an AGI in 2023. There has been no work inside the units.

A Calgary ACORN member who lives in a unit owned by Mainstreet Equity said she moved in 13 years ago and back then it was a lot different. Within the first year, she saw a huge turnover of managers—almost three times. The bathroom sink fell because there was no support, and she couldn't use the bathroom—no washing, no flushing. For the past year, she has been asking for a sink change.

My experience is no different. I moved in May 2018. Starlight Investments bought the townhome I live in from Wynn Family Properties in September 2018. Rent was affordable at $1,599, but I had a leaking roof, no accessibility, fire safety issues, plumbing issues, electrical issues, mould, roaches and more. Starlight displaced three buildings of tenants to fix building and fire code violations. Work was completed in 12 to 15 months, but tenants returned to units that were not properly renovated.

Boardwalk purchased the property in April 2022. There is still no safe accessibility, hallway ceilings leak and there is mould in the bathroom around windows and in corners. Boardwalk ignores outstanding work orders and spends as little as possible to complete repairs. Safety is not a priority. I don't drink the water, because it smells and tastes bad. Appliances are inefficient and old. The rent for a similar three-bedroom is now $2,459 to $2,559.

ACORN member testimonials highlight the following issues. Tenants are living with bedbugs, cockroaches, mould and more. It is nearly impossible to get issues fixed. There is a huge staff turnover. Tenants feel helpless against wealthy corporate landlords who can afford legal representatives at formal hearings. As one tenant says, “It's an unfair fight.”

Rent increases consistently every year, especially in Ontario. Tenants shared that they're getting AGIs back to back. Tenants have expressed stress and anxiety, adverse effects on themselves and their children, fear of displacement and the inability to find adequate housing.

There are policy changes that ACORN would like the federal government to urgently consider.

One, CMHC should create an acquisition fund to enable non-profit, co-op and land trust organizations to purchase at-risk rental buildings when they come on the market.

Two, immediately stop financialized and large corporate landlords from buying affordable housing, or put a limit to how many units they can acquire.

Three, the federal government needs to act on its commitment of taxing REITs.

Four, build 1.5 million affordable homes and target them to people in core housing need.

Five, mandate full rent control across all [Technical difficulty—Editor].

[Technical difficulty—Editor] landlords always put money before people, and they clearly don't care. My question is, when will the federal government care?

Thank you for having ACORN speak at this committee hearing today.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Burkart.

I want to advise the witnesses—because we have to stop at six o'clock—that I'm going to consult with the subcommittee of HUMA to make a decision on the path forward. Mrs. Gray, Madame Martinez Ferrada, Madame Chabot and Ms. Zarrillo are the subcommittee. We'll make a decision on rescheduling. We'll get in touch with the witnesses who appeared today. We had votes in the House, which cut into the time.

Ms. Chabot, I have to adjourn shortly.