As part of the Canadian federal government’s National Housing Strategy and its recognition of housing as a fundamental human right, in February 2022 the federal government appointed a Federal Housing Advocate (FHA), whose role is to promote and protect housing rights in Canada by independently conducting research on systemic housing issues.[1]
The FHA commissioned a series of reports on the financialization of housing, which is described as the growing dominance of financial actors in the housing sector, transforming the primary function of housing into a for-profit financial asset.
According to the summary report to the FHA, 20-30% of Canada’s purpose-built rental housing stock is owned by real estate investment trusts (REITs). The report outlines certain controversies[2]:
Financial firms strategically pursue unit “turnovers” to capitalize on allowable rent increases between tenancies. Researchers in the US have found that financial operators use eviction as a revenue-generating tool, and that they evict tenants at higher rates than other types of owners.
This concentration is higher in Canada’s north. A series of CBC News reports from 2021 highlighted tenant complaints against a publicly traded REIT that owns approximately 80% of the multi-unit private residential housing stock in Yellowknife and Iqaluit.[3]
A recent CTV News article highlighted the results of a survey indicating that “large, publicly-traded corporations, were more likely to face poor living conditions compared to those in housing owned by families or private companies.”[4]
The report for the FHA on the financialization of multi-family rental housing in Canadas describes the negative effects of cost-cutting and under-maintenance strategies of financialized landlords, which result in worsened living conditions, as well as the displacement of lower income and racialized renters.[5]
Human Rights Due Diligence in Commercial Real Estate
In October 2022, BOMA Canada released its 2022 Human Rights Guide for Commercial Real Estate, which draws upon the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines). The guide outlines how commercial property owners can incorporate business and human rights due diligence concepts into their operations.[6]
Human Rights Due Diligence in Multi-Family Rental Real Estate
Without an equivalent set of human rights due diligence practices for REITs operating in the multi-family residential space, banks must ensure that they are complying with their own obligations under the UNGPs and OECD Guidelines. Specifically, banks must ensure they are seeking to prevent and mitigate adverse human rights impacts linked to their business relationships with these REITS, even if the banks themselves have not contributed to those impacts.
RBC Involvement with Canadian Multi-Family Rental REITs
RBC has provided Canadian REITs with capital markets services through RBC Dominion Securities Inc., and each of the leading Canadian REITs discloses having a significant credit facility with a syndicate of Canadian banks.
RESOLVED THAT RBC disclose how it assesses and mitigates human rights risk in connection with its business relationships with clients which own multi-family residential rental properties in Canada.
[1] https://www.canada.ca/en/canadian-heritage/news/2022/02/statement-by-the-minister-of-housing-and-diversity-and-inclusion-on-the-appointment-of-canadas-federal-housing-advocate.html
[2] https://www.homelesshub.ca/resource/financialization-housing-canada-project-summary-report
[3] https://newsinteractives.cbc.ca/longform/the-landlords-game
[4] https://www.ctvnews.ca/business/tenants-with-large-corporate-landlords-more-likely-to-face-poor-living-conditions-survey-suggests-1.5992030
[5] https://www.homelesshub.ca/resource/financialization-multi-family-rental-housing-canada
[6] https://bomacanada.ca/wp-content/uploads/2022/09/BOMACANADA_HumanRightsGuide_2022_EN.pdf