Speculative Friction

FROM JUNE 2025 ISSUE OF WEST END PHOENIX

Real estate speculation has supercharged Toronto’s housing crisis. Is there anything city council can do to protect renters from the goals of investors?

The City of Toronto has set ambitious goals to build lots more affordable housing: 65,000 rent-controlled homes, including 6,500 rent-geared-to-income (RGI), 41,000 affordable rental and 17,500 rent-controlled market units by 2030. Yet it also needs to confront the rampant speculation that has grossly distorted so much of the city’s housing sector.

During the past decade and a half or so, Toronto’s highrise housing boom has fuelled financialization – a phenomenon where housing is viewed as a commodity, rather than a basic need – both by condo speculators looking to capitalize on rising resale values and large corporate property managers and real estate investment trusts (REITs) specializing in rental buildings. At the same time, well-capitalized firms like Akelius, CAP REIT and Starlight Investments have snapped up scores of older apartment buildings and found ways to jack up the operating income by applying for above-guideline rent increases, renovicting existing tenants, making cosmetic improvements and then boosting rents to eye-watering levels.

New rental apartment buildings, which have, according to CMHC, been growing steadily in number over the past decade, tend to target higher-income tenants. Meanwhile, across the older parts of Toronto, gentrification has resulted in the loss of thousands of small apartments in multiplexes or rooming houses that have been renovated into single-family homes.

In all cases, the steady ratcheting up of rents reflects both the impact of decades of underinvestment in non-profit housing and investor interest in housing as an asset class. Low-income residents tend to be the primary victims of all forms of financialization, and frequently end up on the street. And Black tenants, in particular, are more likely to be evicted by corporate landlords, according to research by Nemoy Lewis, an assistant professor of planning at TMU.

Toronto, of course, is hardly the only city facing these conditions. A 2024 National Housing Council (NHC) report on the financialization of the rental market pointed out that Canada spends a fraction of what other Organization for Co-operation and Development (OECD) member countries do on affordable rental housing. “Only four per cent of the housing stock is dedicated to non-market housing,” the report noted. “This means that the majority of housing, including purpose-built rental housing [PBR], is used as a financial investment.”

While more developers are looking to build PBRs now that the condo market is on life support, the number of new affordable (i.e., 80 per cent of average market value) or deeply affordable rentals in Toronto grows at a trickle. Just 406 affordable rental units were finished in 2024, with another 2,585 under construction. (The city approved fewer than 30,000 new rent-controlled homes between 2020 and 2024, well short of its goal of adding 65,000 units by the end of last year.)

Can city council help? Housing experts agree that Toronto needs a lot more low- and mid-range apartments. However, in Ontario, unlike B.C., provincial planning laws don’t allow the city to approve development applications that are geared to a particular type of occupant, be they renters or owners. Nor can the city dictate rents except in heavily subsidized projects.

Yet the city does have levers, and appears to be using them. Since 2021, Toronto has spent $165 million to acquire and fix up more than a thousand rental apartments in 34 buildings owned by non-profit agencies. The program aims to stabilize these properties and ensure they don’t end up getting sold. Mayor Olivia Chow has also spearheaded a push to get the city into the business of developing non-profit housing on municipally owned land. Construction on the first “public builder” project, a 42-unit rent-geared-to-income/transitional housing building on Brock, began over the winter.

The more recent lull in Toronto’s development market may provide a larger opportunity. Last winter, the city invited builders to pitch PBR projects with up to 7,000 units, including 1,400 affordable apartments (20 per cent of the total number), using long-term exemptions for property taxes, planning fees and development charges, worth about $460 million total, as the carrot.

According to Councillor Gord Perks, the response was swift: 75 applications representing 32,600 rental units in just 11 days. Council approved 17, including four in the West End. “We said, ‘We can afford this many units,’ and everybody came forward,” he says. The city is currently planning a second phase, with almost 25,000 rental apartments in total, a quarter of which will be affordable.

But affordable housing consultant Maya Roy, a former NHC advisor and CEO of YWCA Canada, is cautious about such measures, noting the pressures created by chronic supply chain constraints, labour shortages, inflation and now tariffs. “We can’t build our way out of the crisis,” she says.

The NHC’s 2024 report, in fact, argued for policy reforms such as a “Canada housing benefit” aimed at low-income tenants spending in excess of 30 per cent of their income on rent, as well as expanded efforts by municipal governments to acquire older rental buildings and take them out of the real estate market permanently.

“I think there’s a real opportunity to buy up this stock of existing [PBRs], from the 1950s to the 1980s, that are owned by institutional investors,” agrees Joshua Bénard, a Habitat for Humanity executive who sits on the board of Community Affordable Housing Solutions (CAHS), a land trust established by his organization, St. Clare’s Multifaith Housing Society, and the Co-operative Housing Federation of Canada. “Get that back under a non-profit ownership so it’s protected as affordable forever.”

Such solutions require funding from the other orders of government. The NHC, like other advocacy groups, urges Canadian policy-makers to think of housing both as a form of social infrastructure and a human right. Sam DiBellonia, policy manager at Maytree, an organization that looks at poverty solutions through a human rights lens, points out that the federal National Housing Strategy Act, passed by the Liberal government in 2019, explicitly recognizes adequate housing as a fundamental human right, but says Ottawa needs to put meat on the bones of that declaration. She points out that the federal government should sit down with the provinces to find ways of stabilizing rents through controls or other policies that shield lower-income tenants from unwarranted hikes from both corporate landlords and smaller mom-and-pop operators.

As he awaits construction to begin on the first project that will house some of the CAHS’s affordable rental apartments, Bénard stresses that financialization is a crisis with many causes, among them municipalities addicted to tax revenues from speculation; public-sector pension funds with large development holdings; and individuals who wanted to gamble in what was, until recently, an exceptionally frothy market.

“The slowdown of condos in this moment will an offer an opportunity to correct this dependence on investors,” he says. Governments and non-profits should seize the day.