Thank you, Mr. Chair.
I am the president of the Canadian Federation of Apartment Associations. CFAA represents 15,000 owners and managers of over 1.5 million rental homes across Canada, through 13 member associations and direct memberships.
My main professional qualifications are first-class honours B.A. in economics and a long career as a lawyer for those in rental housing. Starting 40 years ago, I acted for renters for six years, in renters and tenant associations. I always like to tell our members that so they don't hear it from somebody else. I'm open about that being where I started. Since then, I have acted for rental housing providers of all sizes.
Many people picture rental housing as apartments in large buildings such as one can see in any large city. However, many other apartments are found in walk-up buildings of three stories or in three-, four- or five-unit buildings. Quebec is famous for its plexes—fourplexes and sixplexes. Over 3,000 rental homes are row houses. All of that together is the purpose-built rental market. It totals 2.5 million homes.
Besides that, there are a little over half a million rental homes in social housing—also called community housing—and then there are two million more rental homes that many people are unaware of or ignore. Those are the rental homes in the secondary rental market. They are rented single-family homes, duplexes, doubles, accessory apartments and rented condos—whether in condo towers or ground-oriented complexes. Anyone can drive or walk down many city streets and not realize that those homes are rented. There are two million of them across Canada. That includes in Toronto, where there are 200,000 of them.
The total rental supply across Canada is five million homes. The details of this are set out on page 2 of CFAA's joint brief with the Federation of Rental-housing Providers of Ontario.
Now, most rental homes of all types are good substitutes for many others. Apartments in towers compete with low-rise apartments and rented condos as well as with the rest of the secondary market. This widespread competition and the fragmented nature of the rental housing industry means that large rental providers have no power to set rents above the levels determined by supply and demand.
Another key issue is how much money rental providers make. Some people picture all or most of the rent money going into the landlord's pocket, but the truth is far from that.
At page 3 of the brief, you will find a pie graph showing where a typical dollar of rent goes. Fourteen cents on average goes to property taxes. Twelve cents is for utilities and 19¢ is for other operating costs. That makes up 45¢ out of every dollar of rent, leaving 55¢ for what is called the net operating income, but we're not done with the expenses. On average, another 36¢ goes to pay the mortgage, and 11¢ goes to pay for major repairs and building modernization. That leaves just eight cents out of every dollar of rent as the pre-tax return on each dollar of revenue—and then there are taxes.
To make its report, the committee will have to choose between two very different views of REITs, rental housing corporations and, indeed, all rental housing providers.
CFAA condemns any action to push people out of their homes. However, under our Constitution it is up to the provinces to regulate and prevent such action. In addition, CFAA believes that such action takes place only in very isolated cases, and that federal tax law is much too blunt a tool to address that isolated behaviour. Instead, tax changes—such as those proposed—could easily have widespread and serious negative impacts on the supply of rental housing.
Excluding REITs or corporations from CMHC mortgage insurance or other housing programs would also risk creating widespread and serious negative impacts on the supply of rental housing.
In conclusion, financialization is not nearly as significant an issue as it is said by some to be, and the proposed cures being suggested to the committee are much worse than the alleged disease.