Are REITs Behind Higher Rent Prices?

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This research explores the role of private investors in rising rent prices in Canada. Record-high rents and low vacancy rates are causing concern. Private real estate investment, especially by real estate investment trusts (REITs), is often blamed for these increases. To understand their impact, CMHC studied REITs in Montréal, Toronto and Vancouver. The findings show that while REITs are growing in these markets, their rents are similar to other landlords in the same area.

REITs ownership of rental properties varied over the years, ranging from 6% to 12% of rental properties in Montréal, Toronto and Vancouver. Their properties often have higher rents — 25% more in Montréal and 1.8% to 5% more in Toronto and Vancouver. However, this difference is mostly due to REITs buying in certain neighborhoods with better amenities. When adjusted for location and operational differences, rent gaps largely disappear. REITs don’t charge more than similar landlords in the same areas. Their strategies, like targeting gentrifying neighborhoods, play a more decisive role in observed higher rents.