December 6, 2023 | Alumni
Growth of ‘financial landlords’ driving affordable housing crisis, says alum Martine August
By Peter Boisseau
Martine August (MScPl 2009, PhD 2014) credits the Department of Geography & Planning for putting her on the path to becoming a widely respected voice on the hot-button topic of affordable housing.
As cities like Toronto declare the lack of affordable housing a public health crisis, a complex mix of policy and borrowing loopholes are making housing less affordable for many Canadians, says August.
Her research points to the growth of financial firms in the housing sector, including the degree of influence that real estate investors availing themselves of easy terms from federal lending agency, the Canada Mortgage and Housing Corp. (CMHC) are having on driving up apartment rents.
Financial firms acting as real estate investors are using CMHC loan insurance terms (i.e. percentage of sales price required as a deposit, typically 20 per cent for rental units) to finance these acquisitions with less cash down than they normally would require without CMHC backing.
Housing recognized as a right in Canada
“We've seen this rising consolidation of ownership of apartment buildings in Canada by financial firms, which are transforming housing into an investment product,” says August.
“These firms have a fiduciary responsibility to maximize revenues and prioritize shareholder value,” she says.
“In my research, the findings are pretty clear. A lot of financial firms boast about how they're active in driving rent increases, and they talk very explicitly about their strategies and goals to add to that shareholder value.”
She says that runs against the idea of housing as a right, a legal concept Canada has recognized.
“I think we’re seeing a lot more attention to this contradiction.”
U of T education was foundation for her innovative research
Her time at U of T provided a great foundation for pursuing innovative and ground-breaking research, she says. Her doctorate was on the massive Regent Park redevelopment in Toronto.
“The education I received in my department was amazing. The collegial atmosphere, the intellectual stimulation, the way it suited students — it's as good as you can get,” says August, an associate professor at the University of Waterloo’s School of Planning.
“The support I got from faculty and the education I received was fantastic. It's a totally stimulating environment. I love U of T.”
With many experts saying it will take what amounts to a “war-time effort” to replenish the housing inventory, August has been doing research work with Julie Mah, an assistant professor in the Department of Human Geography at U of T Scarborough, about the impact of “financial landlords,” including real estate investment trusts or REITs, private equity funds, insurance companies and pension funds.
“The education I received in my department was amazing. The collegial atmosphere, the intellectual stimulation, the way it suited students — it's as good as you can get.”
“REITs have gone from owning zero apartment units in Canada in 1996 to over 200,000 in 2020, and that's about 10 per cent of the purpose-built multifamily housing stock in Canada,” says August.
“REITs are only one kind of financial landlord. I would estimate the financial firms now have up to 30 per cent of apartment properties in the country.”
Financial firms also own 33 per cent of seniors housing in Canada, she says.
“It's often the case for private equity funds; certain rates of return are promised to investors, and executives of these firms typically have their compensation tied to the performance of the firm,” says August.
“These companies are going to be pushing hard to drive up rents, evict at higher rates and cut costs systematically, and do all of these things in ways that can harm tenants.”
August and Mah’s research focused on more than 230,000 eviction filings in the City of Toronto for 10 years pre-pandemic.
“After financial firms buy a property, they increase eviction filings, on average by three times. If the previous landlord was doing 10 eviction filings in every year, the financial firm is doing 30 eviction filings,” she says.
Housing is fundamentally important to our lives and health
August says the best solution to the affordable housing crisis — but most politically intransigent — is the kind of public investment in socially-owned, non-market housing that last occurred in the 1990s.
Her doctoral work at U of T was a revelation about the relationship of systemic inequalities undermining urban societies.
“One of the things I learned when I talked to people who lived in Regent Park was how absolutely critical having affordable housing was in their lives, and not enough people have it,” says August.
“It's so fundamentally important in our lives and for our health, it's worth questioning why we allocate it based on people's ability to pay,” she says.
“Ideally, housing should be provided on a universal basis, in the same way as health care and primary education.”