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Finding Investors in all the Wrong Places

6 June 2023

Statistics Canada has been highlighting the role of investors in the housing market. A recent study of five provinces, including BC and Ontario, found that over 25% of dwellings are owned by investors as of 2020.

The problem is that the StatsCan report is misleading. As noted by two housing researchers in BC, Jens von Bergmann and Nathan Lauster, this analysis is flawed both by how investors are defined and how the analysis is framed. Included in the definition of investor are: governments; for-profit businesses; individuals not found resident in the province; individuals owning more than one property; and individuals resident in the province owning a property with more than one residence.

While it is generally expected that a high share of condominiums are owned by investors, even that data is skewed. Driven by significantly higher property tax rates for commercial properties versus residential properties, large property management firms have converted purpose-built rentals to condos. For example, as noted by von Bergmann and Lauster, about half of the 10.1% of condominium apartments owned by investors in the city of Vancouver are purpose-built rentals legally structured as condominiums. In the city of London, it was reported that more than 86% of the city’s apartment condos were owned by investors. The analysis done by von Bergmann and Lauster suggests that a large portion of these units are actually purpose-built rentals that have been registered as condos.

We see similar concerns where it is suggested that 15% of detached homes are investor owned. Looking back at the definitions, this would include vacation properties as well as properties with secondary suites.

In the most recent StatsCan report on real estate investors, the Canadian Housing Statistics Program (CHSP) highlights the percentage of non-resident investors in BC and singles out the regional municipality of Invermere: “40.9% of owners were out-of-province investors, and this rate reached 69.2% in Radium Hot Springs.” Since development in this area has been targeted for vacation properties for Albertans, it is not surprising to see that there is a higher level of out of province ownership. However, since a significant number of these developments were sold as timeshare units, this would likely skew the ownership percentage much higher.

There are similar problems when looking at within-province “investors.” Owning a vacation property as well as a primary residence makes the owner an investor according to this analysis. Similarly, owning a second home makes the owner an investor according to Statistics Canada. CMHC and the other mortgage default insurers have insurance programs that are targeted to vacation properties as well as to second homes. For rental properties, there is a separate program. One would expect that Statistics Canada would follow CMHC in the definitions of housing ownership.

The BC provincial government has recently announced that a key component of its strategy to improve housing affordability is to get more secondary suites in the province. To that end, the province is going to legalize secondary suites and provide financial incentives as a catalyst to drive their creation. Square One Insurance estimated that 25% of detached homes in BC and as high as 40% in Vancouver have secondary suites as of 2015.

In a 2021 study, CMHC estimated that there are 75,000 secondary suites in Ontario and that 1 out of 6 ground-oriented homes in Toronto has a secondary suite.  A 2022 study by the Centre for Urban Research and Land Development, Brampton: The Land of Secondary Suites, noted the rapid growth of secondary suites in that city.

Within the CHSP definitions, homeowners who have secondary suites are investors. CMHC has highlighted the benefits of these suites, most notably the ability to generate rental income to offset mortgage expenses. CMHC allows 100% rental offset for legal suites to “facilitate affordable housing choices for Canadians.” Most homeowners who have secondary suites would not see themselves as investors – just ordinary Canadians trying to afford their home and make their mortgage payments.

Housing affordability is a key concern for Canadians. Getting the definitions and the framing of the issues is important to ensuring we get good policy outcomes. As best said by von Bergmann and Lauster, “The misleading reporting, combined with sometimes plainly wrong statements by people quoted in the news coverage, on one hand highlights the poor understanding of housing in the public discourse. On the other hand it highlights the importance of providing careful framing with data releases.”


Independent Opinion

The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any person or organization in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice including investment advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication. Readers are cautioned to always seek independent professional advice from a qualified professional before making any investment decisions.

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