NDP MP Jenny Kwan drew Tremblay’s attention to the spike, starting about six years ago, in REITs acquiring properties with moderate rent. “What safeguards are there in place,” she asked, “to prevent REITs from jacking up the prices in the properties that they have acquired?”
Tremblay then added: “The private sector is the largest provider of rental housing, including housing that is affordable, in this country.”
When Kwan gave Leilani Farha a chance to respond, she reiterated that “the business model of REITs requires an escalation of rents.”
Farha explained her concern in more detail: “Real estate investment trusts rely on investors. They’re often institutional investors like pension funds, insurance companies and that kind of thing. If you’re an investor, you want to know that you’re going to get a good return on your investment. The way the REIT guarantees a good return on your investment is they show how they’re going to generate income through rent.”
REIT managers need to show investors how they are going to make those rents go up and up. Since many provinces set guidelines for rent increases on existing tenants, one strategy for REITs is to push tenants out and bring in new ones.