Financial Firms Drive Toronto Rent Hike, Target Vulnerable
In recent years, Canadians have increasingly seen financial firms – such as private equity firms and real estate investment trusts (REITs) – buying up apartment buildings . The largest 25 financial landlords in Canada hold nearly 20 per cent of the country’s private, purpose-built rental stock.
At the same time, Canada’s housing affordability crisis has exploded. A 2022 report found that in 93 per cent of Canadian neighbourhoods, a full-time minimum wage worker cannot afford a one-bedroom apartment .
Many observers have connected this financialization of housing to rising unaffordability. But until recently, a lack of data has made it challenging to prove it.
Our recent study , based on building-level rent and ownership data in the Greater Toronto Area, is the first to decisively show that financial firms charge higher rents and raise them more quickly than other landlords. We also found that financial firms raise rents most aggressively in lower-income areas with more racialized residents.
Financialization refers to the growing role of the finance sector in various parts of the economy. In the rental housing market, it involves the purchase of rental buildings by financial firms like asset managers, REITs and pension funds.
These “financial landlords” treat housing as an investment product, not as a basic human need.
Financial landlords act differently from other landlords. Unlike smaller landlords, they are guided by the ” shareholder value maximization ” principle, which means their primary goal is to maximize returns for their shareholders.
While smaller landlords are most likely also motivated by profit, they do not have a duty to external investors like financial firms do and they do not have access to the same strategies to manage their properties . Financial landlords have the scale and sophistication to pursue these profits in ways that smaller-scale landlords cannot.
Research shows that financial landlords in Canada are associated with increased cost burdens for renters , higher eviction filing rates and higher rates of building disrepair . Our study adds to this evidence by showing they also charge higher rents.
Even before conducting our analysis, we had reason to believe financial firms would charge higher rents, in part because many of them have publicly said so.
In a 2018 investor presentation, Minto REIT wrote that they charged ” the highest in-place rent ” among their public peers.
Similarly, Centurion REIT published a report in 2020 featuring a graph demonstrating that its rent increases were outpacing both inflation and average rents.
In a 2019 white paper, Canada’s largest private landlord, Starlight Investments, wrote about how their ” value add strategy ” for upgrading apartments sets them apart from other types of landlords. In the same publication, they reported increasing the monthly rent in one property by $411 – a 31 per cent increase.
Our analysis reveals that financial firms do indeed charge more.
Our study compared building-level quarterly rent data to average rents from the Canada Mortgage and Housing Corporation for 1,602 buildings between 2022 and 2024.
We found that when landlords advertise a unit to rent, they typically charge more than the average neighbourhood rent. We call this upcharge a rent “premium” – the dollar or percentage difference between the rent posted for an available unit and the average neighbourhood rent for a unit of the same size.
We found that financial firms charged the highest premiums across the GTA, posting 44 per cent higher rents – or $670 more – than local averages. By comparison, non-financial chain landlords – those with multiple buildings but not classified as financial firms – charged a 30 per cent, or $477, premium.
Meanwhile, smaller-scale owners owners of just a few buildings charged a smaller rent premium of 15-22 per cent. We found financial firms charged the highest premiums regardless of whether the building was brand new or in need of repairs.
One of the landlords with the highest rent premiums is private equity firm Woodbourne, which said they used RealPage’s YieldStar platform , an algorithmic pricing software.
This software is at the centre of a lawsuit alleging more than a dozen landlords and property managers conspired to artificially inflate rents across Canada.
The use of AI-driven pricing tools in Canada’s rental market is now under investigation by the Competition Bureau .
Our study also found that, over time, financial firms raised rents more aggressively than other landlords. On average, they increased asking rents by five per cent – or $96 – every quarter. By comparison, smaller-scale landlords owning just one property raised asking rents by 3.6 per cent, or $59.
Using a regression model , we demonstrated that out of all ownership types, financial ownership was the strongest predictor for higher rents and higher rent premiums. Using our model, we estimated that a tenant would pay 13 per cent more for their unit if it was owned by a financial firm instead of a single property owner.
Our study also found that the highest rent premiums were being charged in Toronto’s ” neighbourhood improvement areas .” These are areas the city has identified as having inequitable social and economic outcomes.
While we found that all landlords charge higher premiums in these neighbourhoods, financial landlords were the most aggressive, charging a 49 per cent premium compared to 41 per cent elsewhere.
We also identified a spatial connection between high rent premiums and the number of racialized residents in a neighbourhood: areas with higher rent premiums often had a greater percentage of racialized residents.
These findings suggest that financial firms are complicit in driving gentrification in marginalized neighbourhoods , targeting areas with lower-income and racialized renters for the most aggressive rent increases.
While financial firms report on record breaking annual returns and “rental uplifts” of 15 per cent , Canada faces a dire housing affordability crisis.
Financialization is detrimental to the right to adequate housing . We show that financialization is worsening affordability in Toronto: a trend that will continue, especially since financial landlords are the largest acquirers of suites in the city and the country’s largest landlords.
To address this issue, we support recent policy recommendations aimed at reining in the power of financial landlords . These include better tracking of who landlords are, stricter tenant protections and more social housing .
If left unchecked, financialization will continue to deepen the affordability crisis, with the greatest harms falling on those who can least afford it.
Cloé St-Hilaire receives funding from the Social Sciences and Humanities Research Council of Canada (Vanier Canada Graduate Scholarship). She previously received funding from the Fonds de Recherche du Québec.
Martine August receives funding from the Social Sciences and Humanities Research Council of Canada and the Government of Ontario Early Researcher Award.