Rents are coming due again on Friday. Professor Martine August argues many landlords are financially viable enough to forgive rents during the pandemic, while Tony Irwin, of the Federation of Rental-housing Providers of Ontario, says the only way rents can be eased for many landlords is with government assistance.

We are into our first month of pandemic-induced precarity affecting Canada’s renters. By May 1, this issue will intensify.

Renters are especially vulnerable to economic and health-related hardships COVID-19 will bring. They are more likely to be single-parent families, racially marginalized, new immigrants, and people living with low incomes.

In Canada, 40 per cent of tenants pay more than they can afford, and nearly half of working renters do not have backup savings for even a month. If they lose their jobs or get sick, there is no money for rent.

Amid demands for rents to be waived and forgiven during this pandemic, some are asking: what about the landlords? What will happen to the widower when her boarder doesn’t pay?

According to the Canadian Centre for Policy Alternatives, less than five per cent of homeowners are this type of small-time operator, renting out part of their own home.

It is far more likely that rent cheques go to what I call “financialized landlords.” These are huge companies that allow wealthy investors to profit from rental housing.

In Canada, these players are changing the rental housing landscape. They include a range of financial entities, like Real Estate Investment Trusts (REITs), private equity funds, asset managers, and institutions. These types of firms raise and pool capital from investors, buy and operate buildings, and divvy up the rental income.

Their business has been sizzling hot for years, with a record $9.9 billion invested in rental apartments in 2019 alone.

To capitalize on this lucrative business, financialized landlords have been steadily consolidating ownership across the country. REITs went from owning zero rental suites in Canada in 1996 to more than 194,000 by the end of last year.

Among the country’s 10 biggest landlords, nine are financial vehicles, including CAPREIT, Boardwalk REIT, Starlight Investments (which recently acquired Northview REIT), Realstar, Killam REIT, Timbercreek Asset Management, Skyline REIT, and Mainstreet Equity.

Altogether, 24 of the biggest financialized landlords control around 330,000 suites — about one in five homes in the private, primary rental market (not including smaller buildings and rented condos). This is a conservative estimate, as much of this ownership is difficult to track.

How do financialized landlords deliver value to investors? It’s quite simple. One CEO, speaking at an investment conference, put it this way: “the money and returns are made in the suites, when the suites turn over.”

In other words, investor profits come from tenant pockets, via monthly rental payments. Bigger returns are made when companies “turn over” units, by making them vacant and jacking up rent.

This profit-making model was enabled in Ontario by the deregulation of rent controls in the 1990s.

Last year, one REIT raised rents on “turnover” by an average of 13.5 per cent, and made $1.4 million from the increases alone. Even when suites aren’t turned, these firms systematically raise rents and apply for above-guideline rent increases to extract more value from each home.

This business strategy drives displacement, particularly in gentrifying neighbourhoods where each vacancy (and suite turn) represents the loss of affordable rental housing.

Can these companies weather the storm if we cancel rents during the pandemic? The answer is yes.

To illustrate: a top Canadian REIT earned $778 million in rental revenue last year. Its operating expenses (including property taxes and utilities) were about $270 million — leaving $508 million in net operating income, or profits. This 65 per cent operating margin is common in the business, and is just one metric firms use to show investors how lucrative rental housing can be.

These numbers tell us a lot. First of all, they reveal that tenants pay far more than is required to keep their buildings running. Financialized landlords extract needlessly high rents, systematically transferring income from working people to wealthy fund managers and investors.

Secondly, with these operating margins, companies can absorb substantial rent forgiveness and still operate their buildings. For the company discussed above, even if half of the tenants didn’t pay rent for the entire year, the company would still exceed its operating costs by $180 million.

When large corporate landlords cry poor, they are being disingenuous. This pandemic underlines the reality that housing should be treated as a home for people — not as a financial asset for investor profit-making.

Martine August is an assistant professor at the University of Waterloo School of Planning.

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The COVID-19 pandemic has hit our residents hard. Many renters are experiencing a significant reduction of income. Some are hourly workers whose workplaces are no longer open, and others have been laid off or are at risk of being laid off in the immediate future.

The Canada Emergency Response Benefit of up to $2,000 a month is simply not enough for many families to cover the basic necessities of food and rent — especially not in major cities like Toronto or Ottawa, where cost of living is substantially higher than other areas.

A recent FRPO member survey covering 217,848 rental units showed that almost a quarter (24 per cent) of tenants did not make their full rent payments on April 1st. Operators estimate a 16 per cent shortfall in rent revenue for the month of April.

The situation was even worse for smaller rental providers with nine units or fewer. These property owners estimated a 21 per cent shortfall in their April rent revenue.

These numbers are expected to get worse in the upcoming months. As emergency measures have tightened, more people aren’t working and have spent through their savings. We are very concerned that as the crisis goes on and unemployment grows, so will the amount of unpaid rent.

Rental housing providers understand and are doing their best to help renters during these challenging times. Most are deferring payments and rent increases, waiving late fees, and providing interest-free support to residents who cannot pay their rent on time.

Operators are providing residents with the most up-to-date public health guidance and information on relevant government support programs. There are many stories of building staff who are helping elderly renters and those in isolation by delivering groceries and medication to their doors. More than ever, our members understand we are all in this together.

But to run their buildings, operators need to pay their staff, their mortgages and other building operating costs.

That is why it is so important that renters who can pay, do continue to pay their rent on time, and not heed the calls of some to hold back. If you are in this category, please pay your rent. It is the only way operators can continue to cover the shortfall of those who genuinely cannot afford to pay due to COVID-19 job losses.

Rental housing providers are doing their best, but they cannot afford to cover more and more of their tenants’ rents during the pandemic.

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The COVID-19 crisis has increased the cost of operating buildings. To keep buildings safe, operators are investing heavily in more frequent cleaning and sanitization of common areas, including providing access to hand sanitizers across buildings.

Rent controls have been in place for over 40 years. Rental housing is a low-margin business. Returns on investment are 3 to 4 per cent for most properties. With revenues down 10 to 20 per cent and expected to get worse, many operators are already at risk of not being able to cover mortgages and operating expenses.

For smaller rental owners, their investment, whether it’s a condominium or a house, is often their version of a small business or pension. The revenue pays for everything from groceries to hockey equipment for their kids to long-term care for their elderly parents. For them, nonpayment of rent is a crisis.

We are concerned that residents who fall behind in paying their rent may never be able to catch up. Many Ontarians already lived paycheque-to-paycheque before COVID-19. Their ability to pay months of back rent will simply not exist when the crisis passes.

Like access to food, access to quality housing is a social issue.

When a family struggles to put food on the table, we don’t tell them to go to the grocery store and take the food without paying. We socialize the costs across those of us who can afford to pay a little more and provide these families with government support. Housing should be no different.

We have urged government to create a rent subsidy program to help tenants who cannot pay their rent as a result of COVID-19.

CIBC’s deputy chief economist, Benjamin Tal, has been on record in support of a system where renters can propose how much they can pay, with the difference being covered by the province. The government is eventually repaid once the tenant regains employment, or the province forgives the debt permanently if future income does not give renters the flexibility to pay it back down the road.

We are encouraged by recent comments made by the premier about providing much needed support for residential renters. That is the only solution to address the rental housing challenge arising from the COVID-19 pandemic.

Correction - April 29, 2020: This article was edited from a previous version that misstated Tony Irwin’s given name in the introductory paragraph.

Tony Irwin is president and CEO of the Federation of Rental-housing Providers of Ontario.