Do Canadians really drive up rents? New evidence from Canada’s rental market

Public debate on Canadian housing affordability increasingly focuses on institutional property owners, particularly Real Estate Investment Trusts (REITs). In major cities, REIT ownership is often linked to financialization, rising rents, and tenant displacement. But do higher rents reflect ownership structure, or superior building quality and reinvestment?

New research at the Jonathan Wener Centre for Real Estate at the John Molson School of Business, using detailed building-level data from the Greater Toronto Area (GTA), points to a different conclusion. Once differences in property characteristics are taken into account, REIT-owned buildings do not charge higher rents than comparable non-REIT properties. Instead, rent differences reflect demand-driven amenities and systematic reinvestment—particularly the modernization and decarbonization of aging rental stock.

The research was conducted by Erkan Yönder, director of the Jonathan Wener Centre for Real Estate at the John Molson School of Business, with analytical support from Halil Özgür, a Finance PhD student at the John Molson School of Business.

Pricing is disciplined by fundamentals, not ownership

This conclusion holds even in the most policy-relevant segment of the market: newly constructed buildings completed after November 2018, which are exempt from Ontario’s rent-increase guidelines. If REITs exercised market power, it would emerge in this unregulated segment. Yet REIT-owned buildings in this cohort do not charge higher rents than comparable non-REIT buildings. In both regulated and unregulated segments, pricing is disciplined by market fundamentals rather than ownership structure.

Crucially, decades of rent regulation left enduring scars on the physical quality of controlled stock—capital deficits persisting even when tenants move out. While vacancy decontrol resets unit rents, it cannot instantly reverse building-wide deferred maintenance in roofs, boilers, or facades. This creates a structural quality gap that smaller, fragmented owners often struggle to address. Institutional capital is uniquely positioned to bridge this gap through systematic reinvestment, effectively reversing the disinvestment mechanism observed in rent-controlled environments.

Tenants value quality and efficiency

Amenities drive value. Features such as fitness rooms, bicycle storage, air conditioning and modern common spaces are associated with higher rents because tenants are willing to pay for them. REIT-owned buildings are systematically more likely to include these amenities. Notably, buildings with at least one environmental amenity are roughly twice as likely to be REIT-owned. This suggests REITs generally operate higher-quality, better-equipped rental stock.

These upgrades translate into tangible economic benefits for residents. Our analysis found REIT-owned buildings significantly more likely to feature environmental amenities like energy-efficient air conditioning, bicycle storage, and outdoor spaces. Beyond immediate comfort, these efficiency-focused renovations can reduce tenants’ energy bills and improve operating efficiency. This creates a win-win dynamic where capital improvements align the building’s financial health with tenants’ economic well-being.

The reinvestment channel: Modernizing aging stock

In a market where the typical rental building is over 50 years old, reinvestment is critical. By combining rental data with over 700,000 building permits classified via artificial intelligence, the study shows that REIT-owned buildings secure approximately 74% more permits per year than comparable non-REIT properties. Even more striking, they are twice as likely to undertake environmental upgrades, including HVAC replacements, solar installations and energy-efficiency retrofits.With the average building age at 52 years, this activity is consequential for Canada’s housing strategy. Meeting climate targets requires massive capital infusion to retrofit aging infrastructure. Our findings indicate that REITs are acting as primary drivers of this modernization and decarbonization, effectively future-proofing the rental stock against rising energy costs and climate risks without relying on the public purse. This proactive approach offers a scalable alternative to taxpayer-funded maintenance programs for the country’s aging inventory.

Implications for policy

These findings indicate that policies targeting ownership structure are likely to be ineffective in improving affordability. Once building quality and amenities are taken into account, estimated REIT rent premiums are no longer statistically significant. The evidence shows that institutional owners contribute to modernizing and decarbonizing aging rental stock without systematically overpricing rents. Canada’s affordability challenges are therefore best addressed by easing regulatory barriers, accelerating approvals, and expanding housing supply, rather than focusing on ownership types.

Read the cited article, "Financialization or Modernization? REIT Ownership, Amenities, and Reinvestment in Supply-Constrained Markets."