Investors own nearly half of all purpose-built rental buildings in Edmonton, and as National Housing Day approaches, housing advocates warn that the city's lauded affordability could disappear if governments do not act on this fast-moving trend.
Less than 30 years ago, estimates put the amount of purpose-built rental buildings that real estate operating companies (REOCs) and real estate investment trusts (REITs) owned in Edmonton at just 1.6% of all such buildings. But that proportion reached 47% by 2022, indicates a recent study by the Affordable Housing Solutions Lab, a partnership between the City of Edmonton and the University of Alberta. That's one of the highest percentages in Canada.
The study found the proportion of buildings that REITs and REOCs own increased by 22% between 2019 and 2022 alone. Many do not expect this trend to stop rising, either. The Western Investor, for example, said Edmonton's high immigration numbers and low vacancy rates make it the top city in the country for real estate investors.
Treating rental buildings as investments, judged primarily on their ability to generate profits for investors, is a change in thinking that many have framed as the "financialization of housing." Some, such as the Canadian Centre for Housing Rights, suggest this trend is partly responsible for the loss of affordable housing stock.
To mark National Housing Day on Nov. 22, the Edmonton Coalition on Housing and Homelessness is presenting a screening at Metro Cinema of the documentary Push, which examines financialization's effect on housing affordability around the world. Leilani Farha, the former UN special rapporteur on housing, will present updates on the phenomenon via a video call, and Eric Rice will be on hand to discuss the Edmonton Affordable Housing Maintenance Fund, which he recently created through the Edmonton Community Foundation.
Edmonton housing advocates say the financialization of housing is tied to increases in rent. In 2006, 80% of rental suites in the Edmonton region went for less than $999 a month. Now, the average one-bedroom apartment goes for $1,284 in Edmonton, according to the October summary from Rentals.ca.
There is no concrete proof that the financialization of housing is a cause of increased rents, and tenants have to pay rent regardless of whether the unit is owned by a large entity or by Bill and Martha down the street. But Jim Gurnett, spokesperson for ECOHH, said most local landlords have an incentive to provide high-quality housing at a reasonable price that large financial landlords don't have.
"One of these entities can say, 'We're going to increase rent by 20% or 25%, or we're going to clean out this building of its current renters and renovate it for higher-end rental units,'" Gurnett told Taproot. "They can do those things without really worrying much about it as part of their big financial plan. The end result is that we're pushing people, at the worst, into homelessness, or into lower quality housing as the pool of what's available shrinks."
A hallway inside an Oliver walk-up apartment building. Many of the ubiquitous, walk-up style apartment buildings in the Oliver neighbourhood are owned by REITs or REOCs. (Mack Male/Flickr)
Spokespeople for REITs push back against this narrative. Canada's five largest publicly traded residential REITs, including Alberta-based Boardwalk, have formed a coalition called Canadian Rental Housing Providers for Affordable Housing. The organization said half of its 120,000 rental units rent at 30% or less of the median renter's income, meeting the federal government's criteria for affordable housing.
"As some of the largest owners and managers of affordable market rentals in Canada, we have insight and ideas that will help make a difference," reads the coalition's website. "We want to partner with government and civil society to make policy changes, and invest the capital necessary to deliver the housing that Canada needs and the homes Canadians want."
Moshe Lander, an Edmontonian who is an economics professor at Concordia University in Montreal, said the financialization of real estate emerged as homeowners started viewing their homes as an asset.
"Over time, (housing has) turned into an investment vehicle for a lot of people — people with second homes, people that are renting it out," Lander said. "So, the idea of financialization is, 'Why don't we acknowledge it for what it is, it's an asset like anything else.' If we treat it like an asset, like anything else, that creates the potential for liquidity, which means that the market will work more efficiently."
Lander recognizes the financialization trend is happening on the macro scale, too, with large companies realizing rental housing can lead to a good return on investment.
"Housing as a long-term investment does seem to show that there's a return there, so (REITs) are recognizing that generating a rental stream is the equivalent of generating dividends or coupon payments on a bond," Lander said. "They're merely viewing (rental housing) in a dispassionate way that makes the market more efficient and prices housing more correctly."
The REIT coalition said residential REITs are helping with Canada's housing supply, with thousands of homes in development or under construction.
"REITs are a highly effective tool to seek and deploy capital to build new housing," Mark Kenney, the CEO of CAPREIT, wrote in an editorial in July.
Whether it can be blamed on financialization or not, homelessness is an increasing problem in Edmonton. Homeward Trust's most recent count on Nov. 4 shows 3,080 Edmontonians are homeless. That number has increased by 33% in the past two years.
Gurnett said governments need to start building subsidized housing that is affordable to the most vulnerable people in Edmonton, who have little chance at affording rentals priced at market rates.
"The federal and provincial governments have been utter failures at doing that for 30 years," Gurnett said. "That's why the city now has this problem."
Gurnett added that the province needs more rent controls and rights for tenants, such as limits on rent increases and stringent regulations on evictions for renovations.
"What we need is for government to become more actively involved in paying attention to what's happening for renters," he said. "None of Canada has really good tenant protection and rent legislation, but Alberta is probably the worst in Canada."
In the short term, Gurnett hopes the documentary is informative, and viewers leave the theatre wanting to spread the word. Financialization is nearly invisible, after all, and the affordable housing lab said there is a lack of transparency when researchers try to find out who owns what.
"People will go away that night able to send an email off to the premier and the prime minister to say, 'What I've just learned upsets me. We've got to care about people that can't afford the market rents,'" he said.