Cabinet said corporate landlords have jacked up rent prices, according to Blacklock’s Reporter.
“While large corporate investors own a significant share of Canada’s rental units and must play an important role in solving the housing crisis by building new homes, the government recognizes too many Canadians have experienced renovictions, above-guideline rent increases and other actions that have made rent more expensive,” said cabinet in a report to the House of Commons Human Resources Committee (CHRC).
However, Finance Minister Chrystia Freeland stopped short of proposing repeal of preferential tax treatment for real estate investment trusts in her next budget due April 16.
“More needs to be done to ensure these rental units are affordable for Canadians,” said cabinet.
“It is best to consider policy changes applicable to large corporate landlords to ensure best outcomes on affordability and fair treatment without undermining the important role the private sector must play in building more rental housing for Canadians.”
The report was in reply to a CHRC report published in October questioning the impact of the supply on affordable rental housing if real estate investment trusts were taxed like other corporations.
Cabinet proposed in a ministerial mandate letter in 2021 to “consider possible reforms to the tax treatment of real estate investment trusts.”
Trusts including numerous small shareholders manage 20% of purpose-built apartments in the private sector by official estimate. The trusts are like mutual funds and are not taxed on dividends distributed to shareholders.
Tax treatment of realty trusts dates from 1993. The Parliamentary Budget Office (PBO) said in a report in April assets under management have grown from $80 million to $76 billion since 1993.
Additionally, the PBO said the tax break was worth $55.3 million this year.
“Real estate investment trusts are allowed to flow through their income to unit holders and pay taxes only on the non-distributed portion of their income,” said the PBO.
“These tax advantages have benefited trust investors, particularly non-resident investors and non-taxable Canadian investors.”
These figures were requested by Green MP Mike Morrice (Kitchener Centre, ON), who blamed trusts for running up housing costs.
“Investment trusts are not in housing for what they can contribute; they’re in it for what they can take out,” said Morrice.
“At the very least, they should be taxed fairly.”
The CHRC began hearings in May on corporate landlords and the taxation of real estate investment trusts.
READ MORE: Gov’t committee investigates corporate landlords
Conservative MP Scott Aitchison (Parry Sound-Muskoka, ON) criticized the hearings as an attempt to “demonize private sector landlords.”
Hearings followed its adoption of a motion by NDP MP Bonita Zarrillo (Port Moody-Coquitlam, BC) to “examine the issue of financialization of the housing market, including corporate ownership of single-family homes; rent gouging; renovictions and the impact of real estate investment trusts on the rental housing market, including, but not limited to increased rental rates; and loss of affordable housing units as well as the tax treatment of real estate investment trusts.”