CBC News: Ontario apartment buildings bring investors double-digit returns. Some tenants say they’re paying the price
Posted October 4, 2023
Equiton owns a building in downtown Hamilton where tenants say they’re dealing with deteriorating conditions
A real estate investment company that’s bought up dozens of older apartment buildings in recent years says it has become “a great Canadian growth story,” while some of its tenants say they’re living in a different reality.
Equiton’s strategy is to buy buildings where existing tenants pay below-market rent, and renovate units when those tenants move so they can be rented out at higher rates, generating profits for its more than 8,000 investors, said its vice president Lavelle Lindo. Lindo shared the business insights in an interview with a wealth management company posted online in 2023.
“It presents us with a very, very, very good opportunity,” Lindo said. “There’s a lot of growth, a lot of development and just a lot of good expectations for the years to come.”
Equiton currently owns 30 buildings in Ontario cities such as Toronto, Ottawa, Kitchener, Burlington, Brantford and London and is having a “strong” financial year, according to its June report. After paying operating expenses, it brought home close to $13 million last quarter — up 48 per cent compared to the same period last year. The fund had an investment return of nearly 14 per cent in 2022.
The model, a real estate investment trust, isn’t unique in Canada. But tenants in one of Equiton’s Hamilton apartment buildings say the company is making those profits at their expense.
‘We genuinely care’: company
Equiton purchased and began managing a high rise at 125 Wellington St. N. in 2021. Five tenants of the building told CBC Hamilton that deteriorating living conditions and above-guideline rent increases have pushed them closer to homelessness.
“They’re making tons and tons of money off of us,” said Chris Erie, who’s lived in the building for over a decade and says she relies on the food bank in order to make her $800 monthly rent payments.
“If I lose this apartment I could not afford rent in this economy. I have no couch to surf on. I would be in a tent. I worry about it all the time — what’s going to happen next year?”
Private real estate investment trusts have flourished under Ontario’s current rules that allow landlords to raise rents between tenancies, which incentivizes them to push existing tenants out, said Steve Pomeroy, an executive advisor at the Canadian Housing Evidence Collaborative at McMaster University.
While not all of these companies are “predatory,” Equiton stands out for some of the strategies it appears to use at 125 Wellington and demonstrates why there needs to be better protections for tenants, Pomeroy said.
“They are actually quite transparent in how bad they are,” said Pomeroy, pointing to the contrast between their profit margins and tenants’ living conditions. “They seem to be quite proud of [their actions].”
Equiton denied using predatory strategies, in a statement to CBC Hamilton.
“If residents respect other residents and pay their rent, we are happy to have them for as long as they wish,” said spokesperson Kathy Gjamovska.
“We genuinely care about our residents. ”
2023 bylaw blitz found broken plumbing, bug infestations
The same month Lindo spoke about Equiton’s “secret sauce” to making money, Hamilton bylaw conducted a sweeping blitz at 125 Wellington of 258 of its 364 units.
Officers issued four orders encompassing 20 property standard violations, said Monica Ciriello, director of licensing and bylaw services.
The city ordered Equiton to repair walls, plumbing, bathroom counters, bathtubs, ceilings, doorknobs, closet doors, windows, a garbage chute and a smashed glass fire box. It also ordered the company to address cockroach, mice and bedbug infestations.
Over six months later, Equiton has done most of the repairs, but two orders have yet to be resolved, including for pest problems, Ciriello said.
Erie said since the blitz, conditions have improved in her unit. After waiting seven months, a hole in her bathroom ceiling caused by water damage was fixed. But Erie, who is a member of tenant advocacy group ACORN, continues to hear from tenants with mice, broken walls and appliances.
Walking through the building with Erie earlier this month, CBC Hamilton saw water damage, holes in walls, exposed pipes and garbage in hallways and two dead mice on the pathway outside, a couple metres from the building.
Tenant Lulu Xi said after dealing with flooding in her kitchen for two years and a broken toilet for six months, Equiton has fixed the plumbing issues. But she’s looking to recoup costs at the Landlord and Tenant Board (LTB) including for the mice traps she bought herself when Equiton failed to address an infestation, and space heaters when temperatures plunged in her unit last winter.
“I just want them to fix things,” Xi said.
Equiton said it has spent over $5 million on improving the building, including $100,000 on pest control.
“At Equiton Living, we remain dedicated to providing a secure, pleasant, and well-maintained living environment for all our residents,” said Gjamovska. “We appreciate the trust that our residents and their families place in us, and we will continue to work tirelessly to address their needs and concerns.”
‘People feel stuck’
Tenants have also faced above-guideline rent increases, including one for 4.58 per cent that’s pending at the LTB. Landlords are allowed to increase rent once a year by an amount set by the province to cover inflation, which typically doesn’t exceed 2.5 per cent. Anything over that amount, the landlord has to justify and get approval for at the LTB.
Shelly Morris, a tenant who is a university student and receives social assistance, said if the latest above-guideline increase is approved, her rent will have gone up by over 10 per cent since Equiton took over and she’ll be paying about $100 more a month.
“We’re an inch away from homelessness based on this system that exists,” Morris said of herself and other tenants.
The building is in Coun. Cameron Kroetsch’s ward. He’s visited residents and said there’s a general state of disrepair while Equiton “continually tries to put rent up as high as they can in this building year after year after year.”
“The prevailing feeling is people feel stuck — stuck in a situation where the condition of their unit is in disrepair and they can’t afford to leave,” he said.
Council passed a slew of measures this summer including requiring landlords to register their apartment buildings and be subject to routine inspections, as well as bolstering a fund to help tenants fight evictions.
“This kind of protection for residents to ensure their homes are safe and healthy are all being designed to catch up with the real estate market that’s exploded in the last five to 10 years in Hamilton,” Kroetsch said.
Pomeroy said the province needs to step up rent control measures by restricting how much landlords can increase rent between vacancies. Otherwise, he warned, investment companies will continue to use apartment buildings to “massively increase” their revenues at the expense of tenants.
Article by Samantha Beattie for CBC Hamilton