The Financialization of Housing: Multi-Family Rentals in Edmonton

Like all communities across Canada, Edmonton has a housing problem. And despite many best efforts, this crisis only continues to worsen. How can we best understand and fix this issue of (in)access to adequate housing? The key to understanding and effectively addressing our housing crisis is to take a human rights approach (UNHRC 2019). One way we can apply a rights based approach is by identifying major trends and emerging challenges that negatively impact housing rights (UNHRC 2019, p 20). One major trend that has been identified as a driver of our prolonged housing crisis, including increasingly unacceptable housing, is the financialization of housing.

The financialization of housing is a key structural driver of our housing crisis in Edmonton.

This is a phenomenon that is largely hidden, secretive, incredibly complex, tedious, confusing, and difficult to understand. This can make it incredibly hard to even begin to identify what is actually going on with housing in our community. In the absence of good information narratives can emerge that are in stark contrast to the realities experienced by households trying to access adequate housing. And takes us even further away from understanding the issues at the heart of our housing crisis, much less solving them.

How Financialized is Edmonton’s Primary Rental Market?

^{Click here or on the to view estimates of financialized purpose built rentals in Edmonton versus Canada-wide (as of 2022):}

^{Note: National estimates of financialized multi-family housing range between 20 – 30%.}

We estimated the number of financialized primary rental suites in Edmonton up to (and including) December 31, 2022. The details on the AHSL’s methodology and how we estimated how financialized Edmonton primary rental housing sector is, can be viewed here.

It should be noted that by design, it is incredibly difficult to identify who actually owns our housing. Therefore we only counted those suites with financialized owners that we were certain of. Which included Real Estate Investment Trusts (REITs), Real Estate Operating Companies (REOCs) as well as Asset Managers. As our estimates are very conservative, the number of financialized purpose-built rental suites in the city of Edmonton is likely much higher than 37,304.

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What are the Trends in Edmonton over Time?

There have been particular periods where financialized owners (Asset Managers, Real Estate Investment Trusts, and Real Estate Operating Companies) have been active in acquiring primary rental suites in the city of Edmonton. These acquisitions are graphed below, disaggregated by apartments and townhomes:

Of note, based on recommendations made by Revenue Canada, in 1995 amendments to the Income Tax Act allowed for the creation of Real Estate Investment Trusts (REITs) based on preferential tax treatment (Pachai 2016). In 2007, to curb the amount Canadian Corporations were paying taxes, the Department of Finance established Specified Income Flow Through (SIFT) Trusts and Partnerships (Pachai 2016). What this means is that REITs became exempted from paying corporate income taxes, by handing out their taxable income to unit holders who would then pay personal income tax on that amount. An analysis from 2010-2020 of just 7 REITs found that there was a loss of $1.2 billion in tax revenue from this legislated loophole over those 10 years alone. And lastly with the onset of the Covid-19 pandemic, 1 out of every 5 purchases in the real estate market across Canada in 2020 were by investors (Statistics Canada 2023, Globe & Mail 2021).

The figure below shows the total number of suites that were acquired by financialized firms over time, organized by the time periods they were constructed, in the city of Edmonton:

To contextualize the above graph, in 2022 the numbers of financialized as well as non-financialized suites in the city of Edmonton (including by year of construction, are in the table below:

Finally, we estimated that there are 46 companies who are financialized owners of multifamily rental housing in the city of Edmonton. The top company owns one third of all financialized suites. The top 2 companies collectively own close to half of all financialized suites. The composition of the top 5 financialized owners of multifamily housing are highlighted in the pie chart below (along with the remaining proportion of stock attributed to 33 Asset Management firms and 11 additional Real Estate Investment Trusts (REITs):

Housing Costs Versus Local Incomes

We know that with the financialization of multi-family housing comes less affordable rents (August 2022, ACORN 2022). Edmonton is no different.

Between 2006 and 2016 alone Edmonton lost over 50,000 ‘more affordable market’ rental suites with rents less than $999/month (City & CMA). Looking at Edmonton and the surrounding area:

• In 2006 81% of all rental suites were less than $999/month
• In 2016 27% of all rental suites were less than $999/month

The figure below shows average rental wage versus the percentage of multi-family suites owned by financialized landlords in the city of Edmonton between 1990 – 2022:
^{Click on the figure below to expand}

We can see that there is also a widening of cost in between each type of rental. We also can observe that rises in the cost of rent seem to coincide with the increase of the amount of financialized multi-family housing – which is also highlighted by the graph below (click on chart to view more clearly):

Between 2002 and 2022 rental wage/costs effectively doubled. While Edmonton is often lauded for being affordable, this is not what the data tells us, and this is not the experience of over 68,000 tenant households in Edmonton living in unacceptable housing. And this is especially not the case for women.

For decades, Alberta has maintained the title of the province with the largest gender wage gap across Canada.

If we look at rental wage compared to men’s and women’s average market incomes by age it is clear that women have far less access to housing choices then men as women’s wages have not kept pace with escalating housing costs. This is especially important as this is clearly a barrier for women exiting relationships – further intensified when seeking housing alternatives with children and searching for rental suites with 2 or more bedrooms.

The three graphs below show rental wage for men and women compared with average market income by age. The second chart has the same y axis to show how big the gender wage gap is in Edmonton. The third chart offers a closer look at rental wage and women’s market income.
^{Click on each graph below to expand}

^{Data source: Statistics Canada. Table 11-10-0239-01  Income of individuals by age group, sex and income source, Canada, provinces and selected census metropolitan areas. Income disaggregated by sex and age was not available for census subdivision (city) so data for Census Metropolitan Area (CMA – Edmonton and surrounding area) was used. Rental wage was calculated using average city rents by year (CMHC).}

With the exception of women aged 16-24 and women aged 65 and over, many women were able to afford their choice of size of primary rental apartment within the city of Edmonton up until the the mid to late 2000s.

Realities are even more dire when we look at social assistance rates compared with increasing rental wages:
^{Click on each graph below to expand}

As the majority of individuals and households who are recipients of social assistance live in private market rental housing, it is disturbing that only couples with two children were able to afford average market rents for studio and 1 bedroom apartments in the 1990s. Clearly over the past 30 years neither individuals, nor lone parents or couples with children have been able to afford housing with enough bedrooms for household type.

Federal Response

Review panel on the financialization of purpose-built rental housing

Altogether 116 individuals and 79 organizations sent in written submissions between April and August 2023 (NHC 2024). Of those, 53 individuals were invited to present to the panel over the course of 8 oral hearing sessions held between September to December 2023 (NHC 2024).

On May 27, 2024, the NHC submitted their final report with conclusions and recommendations to the Minister of Housing, Infrastructure and Communities. Minister Fraser has 120 days to send a response to the NHC and 30 days from then to table that response in the Senate and the House of Commons (FHA).

_{Note: this blog was updated May 31, 2024}