New research from Statistics Canada suggests that the dominance of large institutional investors may not be the primary driver behind housing unaffordability in British Columbia’s most expensive cities. The findings indicate that the rental markets in Vancouver and Toronto, despite being Canada’s priciest, are actually the least concentrated and most competitive, characterized by a diverse mix of ownership rather than control by a few major entities. This contrasts with some prevailing narratives that often point to large-scale investors as the main culprits in escalating housing costs.
Understanding Institutional Investors in Housing
Statistics Canada defines institutional investors as entities representing the top 0.1 per cent of property owners based on assessed value within a province. This category includes significant organizations like pension funds, real estate investment trusts (REITs), and large family-owned businesses. The recent StatCan report analyzed ownership data from 12 major metropolitan areas across British Columbia, Ontario, Manitoba, and Nova Scotia, focusing on the residential rental real estate sector.
Contrary to expectations, the study found that the Vancouver and Toronto rental markets exhibited lower concentrations of ownership by these large institutional players compared to markets in Manitoba and Nova Scotia. In B.C., institutional investors accounted for 20.3 per cent of the assessed value of residential rental real estate, while in Ontario, the figure was 23.6 per cent. These percentages are notably lower than those observed in Manitoba (33.6 per cent) and Nova Scotia (38 per cent).
Expert Perspectives on Market Dynamics
Tsur Somerville, a professor at the University of British Columbia’s Sauder School of Business, commented on the data, stating that it makes it “really hard to support the claim that large institutional investors are somehow dominating the market.” He further added that the findings are “inconsistent with any notion of market power to set rent at the metropolitan level.” This suggests that while institutional investors are present, their influence on rent prices at a broad metropolitan scale may be limited.
However, other experts caution that the StatCan report, which analyzes 2022 data, offers a snapshot and might not fully capture the long-term trends or the comprehensive impact of what is sometimes termed the “financialization of housing.” Jeremy Withers, a senior researcher with New Housing Alternatives, a research partnership based at the University of Toronto, noted that research has shown a rise in acquisitions of rental homes by large financial firms in recent years. He also pointed to research in Toronto indicating that tenants in buildings owned by large corporate landlords, such as private equity firms, have experienced higher rates of evictions and rent increases.
“If governments are committed to making housing more stable and affordable and reducing most of these threats, they should direct funding towards helping non-market actors build and acquire more homes,” Withers advised, emphasizing the need for alternative housing solutions.
The Role of Small-Scale Investors and Condo Markets
The prevalence of small-scale investors—those owning five or fewer properties—in provinces like B.C. and Ontario can be partly attributed to the substantial stock of condominium units. Many of these condos are owned by individual investors and subsequently rented out, forming a significant portion of the secondary rental market. This segment has historically contributed heavily to the growth of rental housing, particularly in Metro Vancouver, while purpose-built rental construction lagged.
Ryan Berlin, chief economist for Rennie, observed a significant shift in the new home market. He noted that individual investor purchases, which once constituted about half of all presales and new home purchases between 2001 and 2002, have fallen to less than 10 per cent currently. Concurrently, government initiatives have stimulated a boom in purpose-built rental construction. Berlin anticipates a transformation of the rental landscape, stating, “I do believe we’re entering a new era defined by the rise of branded, professionally managed rental housing.”
Broader Concerns and Future Outlook
Alex Hemingway, senior economist for B.C. Policy Solutions, acknowledged the concerns surrounding corporate power in housing but argued that it might not be the central narrative for the current housing market situation. While sympathetic to critiques of corporate influence and advocating for wealth taxation, he believes other factors are more critical to addressing the housing crisis. Hemingway highlighted concerns about reduced government support for non-market housing and restrictive zoning regulations that impede the development of more apartment buildings in residential areas.
Jean-Philippe Deschamps-Laporte, an assistant director with StatCan’s Centre for Housing and Income Statistics, explained that the project was initiated partly in response to concerns about trends observed in the United States, where large financial firms have acquired substantial portfolios of rental properties in cities like Atlanta and Chicago. “One question we kept receiving is, ‘Are we facing the same dynamics as in the U.S.?’ ” he stated. “Our answer is, ‘Something quite different is happening.’ “
While the StatCan report does not offer explanations for the dramatic rise in Canadian home prices and rents or the decline in homeownership rates, it aims to provide a clearer understanding of rental property ownership. Deschamps-Laporte concluded, “We don’t have a single thing to point at… It’s like when you see the doctor, and you get a test, and it’s negative, and you can rule that out. You don’t have big players like in the U.S., you can rule that out. It’s gradually adding to a set of knowledge.” The data serves to eliminate certain explanations, such as the dominance of U.S.-style large institutional ownership, thereby helping researchers and policymakers to focus on other potential contributing factors to the complex housing challenges.
Conclusion
The new Statistics Canada data offers a nuanced perspective on the ownership of rental properties in Canada, particularly in B.C. It challenges the notion that large institutional investors are the primary force behind market concentration and unaffordability in major cities like Vancouver. While the role of institutional investors is present, the market appears more diverse, with a significant contribution from small-scale landlords and the secondary condo rental market. However, ongoing research and expert commentary highlight the need to consider broader trends, including the long-term impact of financialization, the experiences of tenants in corporate-owned buildings, and systemic issues like zoning and non-market housing support. The findings underscore that understanding Canada’s housing crisis requires a multifaceted approach, moving beyond single explanations to incorporate a comprehensive view of market dynamics and policy interventions.
