The Hill Times: ACORN Canada protests Public Sector Pension Investment Board’s stakes in ‘exploitative financialized housing’
Posted July 6, 2022
Posted July 6, 2022
Affordable housing advocates are calling on the Public Sector Pension Investment Board, Treasury Board President Mona Fortier, and public sector unions to review the public sector pension fund’s housing assets, which they say are financing exploitative housing practices by large corporate landlords.
Members of the advocacy group ACORN Canada marched to the Montreal headquarters of the Public Sector Pension Investment Board on June 20 to protest PSP’s rental housing investments, and to demand that PSP adopt an affordable housing code of conduct. PSP manages total assets worth $230.5-billion on behalf of current and former public service workers, RCMP officers, and armed forces members, according to its 2022 annual report.
ACORN (Association of Community Organizations for Reform Now) Canada is a national organization of low and moderate income people, and affordable housing is one of its key priorities.Tanya Burkart, an ACORN leader from Brampton, Ont., who participated in the protest, told The Hill Times that her group targeted PSP “because they’re one of Canada’s largest pension investment managers,” and “because people with public pensions may not realize how their money is being invested.”
Burkart said PSP invests in “large, billion-dollar, corporate, financialized landlords” whose long-term tenants deal with “substandard conditions” and attempts to displace them in favour of higher-income tenants.
Geordie Dent, executive director of the Toronto-based Federation of Metro Tenants Associations (FMTA), told The Hill Times that beyond simply investing in real estate investment trusts and other large corporate landlords, pension funds are also major landlords in their own right, as apartment building owners. Dent said PSP Investments and other pension funds are part of a trend of investment capital rushing into the rental housing sector after the 2007-2008 U.S. financial crisis, in ways that are causing problems for tenants.
Dent said it can be difficult to determine the extent of a pension fund’s real estate holdings, “because they’re not always listed as the owners. But we have a corporate database of every corporation in the city of Toronto that owns housing. And there’s a huge influence from a lot of the pension funds across Canada. They show up all the time as major owners of large apartment buildings.”
PSP Investments spokesperson Maria Constantinescu told The Hill Times in an email that PSP works with its partners “to ensure that our joint ventures are well-maintained, safe, secure and comply with the law and best industry practices,” and that PSP selects partners with “recognized expertise and experience, who are responsible for the day-to-day operations of the assets we invest in.”
Constantinescu said PSP takes the concerns expressed by ACORN members very seriously. She said PSP had reviewed specific complaints from the protesters about proposed above-guideline rent increases (AGIs) at buildings owned jointly by PSP and Starlight Investments and operated by Starlight, and concluded that the proposals meet the relevant legal criteria.
“The documentation submitted by Starlight showed that all the elements of the AGI calculations pertained exclusively to capital improvements related to structural maintenance, energy conservation, safety, and security. While improvements to building aesthetics and resident experience were also undertaken, these costs were not reflected in the AGI calculations,” said Constantinescu.
The Public Sector Pension Investment Board, commonly known as PSP Investments, manages pension investments for the federal public service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. PSP reports to the ministers responsible for these four groups: the Treasury Board president, the defence minister, and the public safety minister.
According to PSP Investments’ annual report for the fiscal year ending in 2022, the Treasury Board president is responsible for tabling PSP’s annual reports in Parliament, and for selecting its directors from a shortlist proposed by an external nominating committee.
A spokesperson for Treasury Board President Mona Fortier (Ottawa-Vanier, Ont.) did not respond by press time to questions from The Hill Times about whether Fortier said she believes she has a responsibility to make sure PSP’s investments align with government priorities such as housing affordability, and whether she takes these priorities into account when choosing the directors of PSP Investments.
ACORN leader describes poor living conditions
Burkart said ACORN is calling on PSP to commit to following an affordable housing code of conduct that would involve divesting from what ACORN describes as “exploitative housing,” such as real estate business models that rely on the displacement of long-term tenants and the use of above-guideline rent increases, as well as committing to better maintenance standards and to keeping at least 30 per cent of all rental units at below-market rents targeted to people in “core housing need.”
Burkart was a tenant of Canada’s largest private residential landlord, Starlight Investments, from September 2018 until April 1, 2022, when Starlight sold the Brampton, Ont., building to another corporate landlord, Boardwalk Real Estate Investment Trust. Burkart said ACORN has reviewed proxy voting records that show that PSP is an investor in both Starlight and Boardwalk.
“As a tenant of one of those buildings,” said Burkart, “We’ve had to fight for pest control— squirrels in the ceiling, rats, mice, roaches, you name it. … We’ve also had issues with leaks, mould, damage in bathrooms, in hallways, in floors. I know flooring is a particular issue now in our buildings.”
Burkart has previously spoken to The Toronto Star about conditions in her building, and ACORN has specifically called for PSP to divest from its investments in Starlight. At the time of The Toronto Star article, Boardwalk said that it had recently acquired the property and was in the process addressing tenants’ concerns.
Starlight Investments spokesperson Danny Roth told The Hill Times in an email that “despite the attempts by some to mischaracterize our approach to rental housing, we are fully committed to the welfare of our residents and security of their tenure.
“We believe the daily operations of these assets and the myriad of individual decisions affecting a building’s physical operation or individual resident-related issues are best left to the discretion of the asse operator and/or their professional third-party managers,” said Roth.
Dent said Burkart’s experiences are consistent with what many tenants have experienced “in the highly financialized markets in Canada. That’s mostly Toronto and Vancouver, and, to a lesser degree, even Montreal.”
“Part of the process of financialization is, it stops looking at housing as infrastructure and a long-term investment, and it starts looking at housing as an investment class that you have to squeeze every last dollar from,” said Dent.
Dent said landlords looking to maximize cash flow from rental income will look for ways to evict long-standing low-income tenants in order to replace them with higher-income tenants, exploiting a gap in Ontario’s rent control regime called vacancy decontrol, in which landlords can raise rents as much as they want on a vacant unit. Dent’s organization also helps tenants resist the use of above-guideline rent increases, ostensibly intended to allow landlords to recoup the cost of capital improvements, but which Burkart said have been used en masse as a way to get around rent control restrictions.
Roth responded to ACORN’s characterization of Starlight Investments as a financialized landlord that seeks to displace lowand moderate-income tenants by saying that “in these challenging times we take a conscientious and careful approach to the assessment of any rent increases at our buildings.”
“Our industry-leading management teams work diligently to assist any resident struggling to meet their financial obligations by offering assistance—from rent relief to rent forgiveness—when it is needed most,” said Roth.
‘There’s been a lot of effort to try to get unions to understand what they’re investing in,’ says tenant advocate
Dent said that a pension fund “just buying a building and having some property manager run it the way it’s always been run” wouldn’t be a problem. But he added that the financialization of rental housing means that large landlords “start looking at the building not in terms of how much it makes in terms of rental income, but how much the building is worth as an asset itself.”
“You get these weird scenarios where you see buildings left half empty in Toronto,” he said. “What the landlord is trying to do there is keep it empty, renovate the whole thing, and sell it to a pension fund.”
“That’s where the change is happening. That’s what the pension funds are contributing to,” Dent said.
Canada’s largest public sector pension funds are disproportionately large global investors. Beginning with the Ontario Teachers’ Pension Plan, Canadian pension funds began adopting private sector investment practices in the 1990s, hiring independent investment managers and investing in global capital markets. “The Big Eight” Canadian pension funds have grown substantially since then, and now manage approximately $2-trillion in assets overall.
The Economist magazine dubbed Canada’s largest public sector pension plans the “Maple Revolutionaries” in a 2012 article, and the so-called “maple model” or “Canadian model” has been copied by pension funds and sovereign wealth funds around the world.
PSP has a mandate to invest its assets “in the best interests” of its contributors and beneficiaries, and “with a view to achieving a maximum rate of return, without undue risk of loss.” Constantinescu confirmed that PSP operates at “arm’s length from the Government of Canada,” and added that its investment decisions are informed by the governance model outlined in the Public Sector Pension Investment Board Act.
This model has been a financially successful one for PSP and other public sector pension funds, but some advocates have questioned its social implications, arguing that unionized workers’ pensions are being managed at arm’s length from the values and social priorities of the labour movement. Dent said most union members probably don’t have a good understanding of how their pension funds are influencing Canada’s housing sector.
“There’s been a lot of effort to try to get unions to understand what they’re investing in,” said Dent. “Normally pension funds will have certain firewalls between the fund itself and the union leadership. Mostly because a pension fund’s main job is to grow the pension, not necessarily follow the desires of union leadership.”
“However, union leadership is still supposed to philosophically influence the types of investments that unions would be comfortable or not comfortable in investing in.”
Article by Kevin Philipupillai for The Hill Times