The Leveller: “Rein in the REITs”: Tenants demand action against real estate investment trusts

Tenants and activists are beginning to push back against the threat to affordable housing posed by Real Estate Investment Trusts (REITs). A series of protests were organized in nine cities across Canada on February 3 to demand the federal government close tax loopholes for REITs. 

 

The demonstrations coincided with the release of a report by the ACORN Tenant Union — “Rein in the REITs” — that accused financial real estate actors of exacerbating the affordable housing crisis in Canada.

 

“REITs have been buying up massive swaths of Canada’s aging rental housing stock and pursuing a strategy that has led to a mass tenant displacement and skyrocketing rents,” according to an ACORN press release. The federal government has aided and abetted this strategy, it adds, introducing a REIT exemption in the Income Tax Act in 2011.

 

In Ottawa, protesters rallied in the Herongate community, one of the lower-income  and most racialized neighbourhoods in the city. They converged on the local rental office of Timbercreek Communities, recently rebranded Hazelview Properties. (This is just the latest twist in the convoluted history of companies with ever-evolving names that have owned Herongate, which we tracked up to 2018 in our article “The German Money Behind the Heron Gate Evictions.”)

 

Herongate is owned by Timbercreek Asset Management, a financialized real estate firm worth over $10 billion. Timbercreek is in the process of demolishing sections of the Herongate neighbourhood — after years of systemic neglect —to build some 5,500 new units. Since 2016, over 800 people have been displaced from their homes in two separate mass evictions. The first phase of redevelopment was recently completed, offering “resort-style living” for over double the rent of the demolished units.

 

The multi-city demonstrations — which included delivering letters to various MP offices — were followed by a virtual rally attended by around 90 people. The event featured a presentation of the “Rein in the REITs” report, tenant testimonials, guest speakers, as well as a phone blitz to federal politicians, including Prime Minister Justin Trudeau.

 

BC ACORN member Ashwini Manohar co-presented the Rein in the REITs report at the virtual rally.

 

“We really need the federal government to wake up and stop giving a massive sweetheart tax deal to corporate landlords whose business model is focused on raising rents as much as possible,” said Manohar.

 

Jenny Kwan, federal NDP MP for Vancouver East, spoke of a national housing crisis that has proliferated since the federal Liberals cancelled the national affordable housing program back in 1993.

 

 

Kwan noted that not only do REITs not pay their fair share of taxes, but they are also in the business of acquiring scarce housing stock. Kwan spoke of the critical need for an acquisition fund that would enable non-profit organizations to purchase rental housing stock at risk of being acquired by REITs when they come on to the market.

 

“We need to stop taxation incentives for REITS, we need to stop the financialization of housing, and we need to ensure that housing assets are kept in public hands,” said Kwan. “We need all of these resources in place if we want to truly address the housing crisis across the country.”

 

With the assistance of the group Canadians for Tax Fairness, the Rein in the REITs report calculated the amount of taxes paid by seven of the largest residential REITs. It showed they would have paid over $1.2 billion more since 2010 if they were taxed at the same rate as non-REIT Canadian corporations. CAPREIT alone — Canada’s largest REIT with some 57,000 units — would have paid $425 million more in taxes, according to the report.

 

For critics, REITs exemplify the commodification — or financialization — of rental housing, where shelter is increasingly approached as a financial asset that produces profits for investors.  

 

“REITs pool the capital of multiple investors to own, operate, or finance income-generating real estate,” explains the report. “Investors can receive returns on their investments without needing the expertise to buy or manage any properties themselves.”

 

Through REITs, investors buy shares in real estate asset funds and earn dividends from their operations. This model incentivizes financialized real estate investment firms to “add value” to their acquisitions as a principal strategy, which involves either raising rents, cutting expenses, or often both. The most financially rewarding way for REITs to raise rents is to push low-income tenants out, since legal restrictions on raising rents disappear when a renter moves out. The result is the accelerated displacement and dispersal of lower-income tenants from gentrifying buildings and neighbourhoods. 

 

The strategy to drive and enhance revenue streams is articulated in Ottawa-based InterRent REIT’s 2014 annual report, which lists “removing undesirable tenants” and replacing them with “more desirable tenants” as one of the ways it is “continuously looking” to “enhance” its revenue stream. 

 

A screenshot from the InterRent REIT 2014 Annual Report

 

REITs rose out of the ashes of federal and provincial housing disinvestment in the 1990s, where the federal and Ontario provincial government withdrew responsibility for social housing provision and facilitated investment firm access to the real estate market. According to University of Waterloo planning professor Martine August, REITs went from owning zero rental suites in Canada in 1996 to more than 194,000 by the end of 2019. REITs and other financialized real estate investment firms now comprise the majority of the largest landlords in Canada.

 

Coinciding with the rise of REITs, and the increasing number of units under their control, is the consistent losses of affordable rental stock. Local housing researcher Steve Pomeroy has documented the staggering decline in hundreds of thousands of affordable units over the past 20 years. Pomeroy’s research highlights that for every one unit of affordable housing created, 15 are lost, and financialized real estate is a primary culprit. 

 

Leilani Farha, formerly the UN Special Rapporteur on the right to adequate housing, has called financialization “the corporate capture of housing,” adding that it’s “when housing is treated as a commodity — a place to park capital and grow wealth — rather than as a social good and a human right, a place of dignity and respite from the world.”

 

According to 2016 census data, over 1.1 million renter households experiencing core housing need (living in unaffordable or inadequate or unsuitable dwellings) in Canada. Because of this, ACORN is calling for the federal government to peg the tax rate for REITs based on how much affordable housing they are providing or destroying.

 

At the Ottawa demonstration in Herongate, ACORN activists delivered a letter to the landlord on Cedarwood Drive, a copy of which was obtained by The Leveller. Addressed to President and CEO Ugo Bizzarri, the letter demanded that Hazelview Properties stop all efforts to destroy existing affordable housing and push out long-term tenants. 

 

In addition, the letter called on the landlord to halt applications for above-guideline increases to rent, respond in a timely way to requests for repairs and pest treatment, offer rental replacements of equal size and cost to victims of the 2016 and 2018 mass evictions, and to cease evictions during the pandemic and post-pandemic recovery period. (For more on this, see our companion piece “Ontario’s Eviction Crisis.”)