Toronto’s got an investor problem thanks to the city’s broken housing market

Former city chief planner Jennifer Keesmaat on what we can do about it

A new report from Statistics Canada found investors account for a whopping 36.2 per cent of condo owners in Toronto, 41.9 per cent in Ontario and for 20.2 per cent of homeowners in Ontario. Jennifer Keesmaat, former chief city planner and founder of rental housing development company Markee Developments, gets into what this means for the city.

What do these stats tell us about Toronto?

It’s a reflection of a significant under building of purpose-built rentals, which creates a market opportunity that potentially can make renters vulnerable. In the absence of having sufficient purpose-built rentals, we’ve seen investors coming into this space because housing can be built, you can purchase that housing and then rent it out for a return. There’s many who would argue this is a bad approach to housing supply and a risky approach to rental supply because it essentially means that rental housing is purely tied to an under supply of rental. There’s an interest on the part of investors in under supply of rentals because that just drives prices up.

What about the argument that investors need to buy these condos or they won’t get built?

It is absolutely true that in the absence of having an economic structure and incentives to build rental housing, the greater risk is that we have no housing at all. But that dynamic whereby condo builders are building housing that’s being purchased by investors in order to be rented is an outcome of a broken housing market. And that’s not the outcome that we desire. By definition, if someone is an investor in housing, that housing is not going to be affordable because the whole goal of the investor is to be turning a profit.

We’re really good at building buildings, but, for a variety of reasons, the financial structures we have in place are a disincentive to building rentals. And we’ve got to fix that.

What are those disincentives?

The biggest issue right now is interest rates, which spiralled out of control. And as a result, there’s a series of programs at CMHC [Canadian Mortgage and Housing Corporation] that are no longer viable. We have seen quite a bit of rental housing built in the city of Toronto over the past 10 years, and those buildings were built as a result of the rental construction financing incentive at CMHC. That program needs to be reconfigured to work in the current interest rate environment.

Should we regulate investors?

I don’t think so. If we take care of the root problem by flooding our market with high-quality and affordable rental housing, then my guess is there will be less of an incentive to treat condo units like an investment.

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