Struggling homeowners not your typical landlord: The case for rent forgiveness 

March 31, 2020

3-minute read

In the age of COVID-19, where the unemployment rate is now estimated at 13.5% and many are struggling to pay next month’s rent, the necessity of suspending evictions, providing income supports for low-income households, and having a serious conversation about rent forgiveness couldn’t be clearer.

A number of government measures to address the first two issues have been announced, but rent forgiveness has proven to be a more delicate topic—not everyone seems willing to consider the notion that landlords might have to forgive arrears at the end of this crisis. 

One of the challenges in discussing rent forgiveness is that people think of different things when they hear the term landlord. 

Are we talking about the widow down the street, on a fixed income, who rents a room to students? A couple with children, living in an expensive city, who lives on one floor of their home and rents the other floors out to pay the mortgage? A family who owns a few condos? A family business that owns a small apartment building? A large real estate investment and management company? Or a lucrative real estate investment fund? 

Whichever landlord first comes to mind is likely to influence how people feel about rent forgiveness.

To continue to press for, but also inform this much-needed conversation, this blog post provides one crucial clarification: the widow down the street and the struggling couple are not your typical landlords. 

According to the most recent (2016) Statistics Canada’s Survey of Financial Security (SFS), 62% of the almost 15.4 million households in the country (9.5 million) own their principal residence and 38% (5.9 million) rent. 

Among homeowners, 7.6 million own only their residence and no other real estate property; and of these, only 340,000 households rent a part of the property. That’s 4% of all homeowners.

Clearly, most of Canada’s 5.9 million tenant households don’t rent from the 340,000 homeowners who rent out only a part of their residence. 

While homeowners who rent a portion of their home are not in the same bleak financial situation as working tenants living paycheque to paycheque, many of them don’t have that much cushion either. In 2016, the median after-tax income for this group of households was $53,400, and half of them had only up to three months of income in savings (liquid assets not including the value of the property). Sixty-six per cent have a mortgage hanging over their heads.

Asking these landlords to forgive rent in arrears would put them in a vulnerable financial situation, especially if their own employment income has also been affected. 

But these are not your typical landlords. 

Martine August, of the University of Waterloo, has shown that the 20 biggest landlords in the country owned 20% of all rental suites in 2017. Most of these businesses are not traditional private companies. They are Real Estate Investment Trusts (REITS), which are financial vehicles that manage assets on behalf of investors. 

The annual report of the largest landlord in the country, a REIT, describes 2019 as “yet another record year” with “solid increases in all key performance benchmarks.” The report by Canadian Apartment Properties REIT boasts a 4% increase in average monthly rents, year over year, and a 15% hike in Net Operating Income (i.e. profit). 

And that’s why a rent forgiveness conversation is still in order. 

Housing is a basic necessity and recognized human right in Canada, but for too many years, it has been treated as an extremely lucrative business. The low supply of affordable rental units, coupled with new financialization mechanisms, has enabled investment trusts, asset management companies, and other financiers to profit from working people's desperate need for a roof over their heads.

And now we are faced with an unprecedented crisis that has challenged us to rethink many old practices. How we house people should be top of mind.

Individuals and families who rely on some rental income to pay their bills and secure their own roof can't absorb large losses. While all evictions must be suspended, a combination of rent supplements (like the measures announced in B.C.) and tax incentives could ensure the well-being of renters and landlords sharing a residence.

Small businesses must have access to the economic supports offered by the federal government, while being required to pass relief onto tenants.

The large financialized landlords should not expect to continue to post double-digit profits; their shareholders shouldn't collect the lion’s share of the Canada Emergency Response Benefit and other income support programs put in place to assist Canadians impacted by the COVID-19 crisis. 

Rent forgiveness will be a difficult but unavoidable conversation. 

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