New research analyzing the British Columbia rental home market suggests that housing unaffordability in Canada’s most expensive cities may not be directly linked to the dominance of large institutional investors or a high concentration of ownership. While this trend, often referred to as the “financialization of housing,” has been a subject of intense debate, recent data indicates a more complex ownership landscape than previously assumed.

Understanding Institutional Investors

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 typically includes major organizations like pension funds, real estate investment trusts (REITs), and substantial family-owned businesses. The scope of these entities has been a focal point for policymakers and researchers concerned about their influence on housing affordability.

Key Findings from the Research

A Statistics Canada report examined ownership data from 12 major metropolitan areas across British Columbia, Ontario, Manitoba, and Nova Scotia. Contrary to expectations, the study found that Vancouver and Toronto, Canada’s two priciest rental markets, exhibited the least concentration and highest competition among owners. This suggests that these markets are not dominated by a small number of very large property holders.

Instead, the ownership of rental properties in these areas is distributed among a diverse group of small, medium, and large investors, with small-scale landlords forming the most significant segment. The proportion of residential rental real estate held by large institutional investors was notably lower in British Columbia (20.3 per cent of assessed value) and Ontario (23.6 per cent) when compared to Manitoba (33.6 per cent) and Nova Scotia (38 per cent).

Expert Perspectives on Ownership Concentration

Tsur Somerville, a professor at the Sauder School of Business at the University of British Columbia, commented on the findings, stating that the data makes it “really hard to support the claim that large institutional investors are somehow dominating the market.” He further noted that the statistics appear inconsistent with any notion of these large entities possessing significant market power to dictate rents at a metropolitan level.

However, other experts caution that the presented data offers a snapshot from 2022 and may not fully capture the long-term evolution of corporate ownership in the Canadian housing sector. Jeremy Withers, a senior researcher with New Housing Alternatives, a research partnership based at the University of Toronto, pointed out that research has indeed shown a rise in acquisitions by large financial firms in recent years. He also highlighted findings from Toronto suggesting that tenants in buildings owned by large corporate landlords, such as private equity firms, have experienced higher rates of evictions and rent increases.

Withers advocates for government intervention to support non-market housing providers. “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,” he advised.

The Role of Small-Scale Investors and Condo Markets

The prevalence of small-scale investors in British Columbia and Ontario, defined as those owning five or fewer properties, can be partly attributed to the substantial stock of condominium units in these provinces. Many of these condos are owned by individual investors who rent them out. This “secondary rental” market constitutes a significant portion of the rental housing supply in regions like Metro Vancouver and has been a primary driver of rental home growth in recent decades, contrasting with the limited construction of purpose-built rental housing.

Ryan Berlin, chief economist for Rennie, a real estate advisory firm, observed a significant shift in the market. He noted that individual investor purchases in the new home market have dramatically decreased, falling from approximately half of all presales and new home purchases between 2001 and 2002 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: “So the landscape is now changing for sure. I do believe we’re entering a new era defined by the rise of branded, professionally managed rental housing.”

Broader Concerns Beyond Institutional Ownership

Alex Hemingway, senior economist at B.C. Policy Solutions, a progressive think tank, acknowledged the public’s concern regarding corporate power in housing but argued that it might not be the central issue. “The figure of the ‘institutional investor’ has loomed large in housing discourse in recent years and sometimes been vilified,” Hemingway stated. “I’m very sympathetic to critiques of corporate power… But that’s really not the story of what’s happening in our housing market.”

Hemingway believes that while understanding property ownership is valuable, more pressing concerns for addressing the housing crisis include the reduction of government support for non-market housing and restrictive zoning regulations that impede the development of more apartment buildings in residential areas.

Context and Future Directions

Jean-Philippe Deschamps-Laporte, an assistant director with Statistics Canada’s Centre for Housing and Income Statistics, explained that the research was partly prompted by concerns about trends observed in the United States, where large financial firms have acquired substantial property portfolios in cities like Atlanta and Chicago. “One question we kept receiving is, ‘Are we facing the same dynamics as in the U.S.?’ ” Deschamps-Laporte said. “Our answer is, ‘Something quite different is happening.’ “

The Statistics Canada report does not offer explanations for the sharp increases in Canadian home prices and rents or the decline in homeownership rates. Its primary aim is to provide a clearer picture 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 findings suggest that while institutional investors are present, their role in the Canadian market, particularly in B.C., may be less dominant than commonly perceived, with other factors likely contributing significantly to housing affordability challenges.