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. Contrary to popular belief, the data indicates that major metropolitan rental markets in B.C. and Ontario are less concentrated and more competitive than those in other provinces, with a significant portion of rental properties owned by smaller-scale landlords.
Understanding Institutional Investors
Statistics Canada defines institutional investors as entities representing the top 0.1 percent of property owners by assessed value within a province. This category encompasses major organizations like pension funds, real estate investment trusts (REITs), and substantial family-owned businesses. The agency’s report analyzed ownership data from 12 large metropolitan areas across British Columbia, Ontario, Manitoba, and Nova Scotia, focusing on the rental housing sector.
Key Findings on Market Concentration
The study revealed that Vancouver and Toronto, Canada’s most expensive rental markets, exhibited the lowest concentration of ownership and the highest market competitiveness. This means these markets are not dominated by a small number of very large owners. Instead, they feature a diverse mix of small, medium, and large investors, with individual landlords owning the majority of rental homes.
Furthermore, the proportion of residential rental real estate held by large institutional investors was notably lower in B.C. (20.3 percent of assessed value) and Ontario (23.6 percent) compared to Manitoba (33.6 percent) and Nova Scotia (38 percent). This finding challenges the narrative that large institutional players are controlling these key markets.
Expert Perspectives on the Data
Tsur Somerville, a professor at the Sauder School of Business at the University of B.C., commented on the implications of the data. “The data is inconsistent with any notion of market power to set rent at the metropolitan level,” Somerville stated, suggesting that the findings make it difficult to support claims of market domination by large institutional investors.
However, some experts caution that the Statistics Canada report provides a snapshot and may not fully capture the evolving dynamics of housing ownership. Jeremy Withers, a senior researcher with New Housing Alternatives, an organization based at the University of Toronto, noted that while the 2022 data shows smaller landlords owning more, other research indicates a significant recent increase in acquisitions by large financial firms. Withers also pointed to research in 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.
“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 recommended, advocating for increased support for non-profit and co-operative housing initiatives.
The Role of Small-Scale Investors and Condo Markets
A significant factor contributing to the high number of small-scale investors (those owning five or fewer properties) in B.C. and Ontario is the large stock of condominium units. Many of these condos are owned and rented out by individuals who may own just one or two properties. This “secondary rental” market constitutes a substantial portion of the rental supply in areas like Metro Vancouver, and it has been the primary source of new rental homes over the past few decades, contrasting with limited construction of purpose-built rental housing.
Ryan Berlin, chief economist for Rennie, a real estate advisory firm, observed a dramatic shift in the new home market. He noted that individual investors, who previously accounted for about half of all presales and new home purchases in B.C. between 2001 and 2002, now represent less than 10 percent. Berlin also highlighted that government programs have recently stimulated a boom in the construction of purpose-built rental housing.
“So the landscape is now changing for sure,” Berlin remarked. “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, a progressive think-tank, acknowledged the concerns surrounding corporate power in housing but argued that the current data doesn’t fully align with this narrative in B.C. “I’m very sympathetic to critiques of corporate power,” Hemingway said. “A lot of my work as a policy researcher relates to taxing wealth and cracking down on corporate power. But that’s really not the story of what’s happening in our housing market.”
Hemingway emphasized that while understanding ownership is important, more significant obstacles to addressing the housing crisis include reduced government support for non-market housing and restrictive zoning regulations that hinder the development of more apartment buildings. He believes these systemic issues are more pressing than the concentration of ownership by large institutional investors.
Jean-Philippe Deschamps-Laporte, an assistant director with Statistics Canada’s Centre for Housing and Income Statistics, explained that the agency initiated this research partly in response to concerns about trends observed in the United States, where large financial firms have acquired significant 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 stated. “Our answer is, ‘Something quite different is happening.’ “
While the Statistics Canada report does not offer explanations for the sharp rise in Canadian home prices and rents or the decline in homeownership rates, it aims to provide a clearer picture of rental property ownership. “We don’t have a single thing to point at,” Deschamps-Laporte concluded. “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 a more complex ownership landscape than often portrayed, with a significant role played by individual landlords and a different dynamic compared to the U.S. market.
