Maroc - STOREYS.COM - A La Une - 19/Aug 15:37

CAPREIT CEO Mark Kenney On The "Financialization Of Housing"

Mark Kenney has a few things he'd like to get off his chest. First and foremost, he believes the narrative around the "financialization of housing" is overblown and misguided. He also thinks there should be a much bigger uproar over how the Government of Canada has handled the housing crisis over the last decade. He's got some thoughts on housing policy, too.Kenney has been with Canadian Apartment Properties REIT (TSX: CAR.UN) since shortly after the REIT was founded in 1997 and has served as President & CEO since late-2018. Over that time, CAPREIT has become the largest publicly-traded landlord in Canada, with over 45,400 units in its portfolio as of June 30, 2025 and a total asset value of approximately $14.5 billion.Heavy is the head that wears the crown, however, as CAPREIT has become the recurring subject of academic studies and reports focused on the aforementioned "financialization of housing." This school of thought is that one of the culprits of Canada's housing crisis is the treatment of homes as not just a place to live, but also an investment asset where profits can be found.In an interview with STOREYS in late-June, Kenney addresses the "financialization of housing," explains why Canada needs to be more pro-investment and pro-development, and provides some insights into CAPREIT and the overall real estate investment landscape in Canada.Responses have been lightly edited for length and clarity.How would you describe the current investment landscape? Have you seen any shifts since Prime Minister Carney was elected?I'm cautiously optimistic about what we have seen. I'm pleased to see that the government is acknowledging the depth and the complexity of the issue. That's definitely a change from the prior regime. Same party, but different view, so I'm very encouraged by that. If you look back at my LinkedIn history, I've been talking about this for a couple of years now. And the problem has just gotten worse. It hasn't gotten better. 2030 was when the CMHC's call for 3.5 million additional new homes was set for and, instead, we've gone in the opposite direction.There is still a very concerning war on development in Canada. It's a battle of ideology. The way I characterize it is that Canadians vote very favourably in terms of immigration at the federal level and against development municipally. And you have this whole ideology, which finds itself in the universities. For example this Martine August and her "financialization of housing" argument...We just completely don't agree with anything in that report. We think she's taking a very narrow-minded view of REIT purchase participation in the market. She's now broadened the definition to corporations, but the original argument was on REITs, and Canadian apartment REITs own less than 3% of the rental market. It's getting smaller, because of privatization — InterRent, CAPREIT selling most of its income-distressed buildings to non-profits — and yet they continue to blame that micro-segment for the affordability crisis in Canada.My other beef is that there is this vile, almost racist, ideology against foreign investors in Canada. The claim is that they're exploiting the marketplace in speculative housing, and my response to that is in Toronto and Vancouver, without foreign buyers, we would have less housing. These condos would not have been built if it wasn't for foreign buyer deposits, which launch condo projects. It's like there's a group out there that continues to war on byproducts of the problem, not the problem itself.I understand and am sympathetic to the idea of foreign buyers snapping up suburban real estate and taking it away from the audience in the middle of the marketplace. And that was a problem in places like Australia as well, but Australia was able to do another step of thinking in saying foreign buyers play a really important role in development and less of an important role when it comes to just the valuation of real estate. And so what Australia did was allow foreign buyers to participate in multi-family development. Smart! In Canada, it's a blunt instrument. It's almost racism. At the end of the day, it's coddled in this extremely foul characterization of foreign investors and I find it really disappointing.You've still got deniers out there. You've still got those who are anti-development industry. Their voices are pretty loud, but the federal government doesn't seem to be buying into it. I'm very encouraged to hear the MURB program discussion and anything that would stimulate investment. The world wants to come to Canada to invest in housing, but the world capital that's required here is afraid of government and afraid of what government is going to do next. We hear that all the time from international investors that look at Canada. "We love the country, we love the fundamentals, housing is an easy bet," but they're afraid of government intervention. But so far, we're not seeing that from this Liberal government. It's been quite refreshing.What I find interesting is that many of Canada's largest pension funds invest in real estate and there's probably people out there that complain about investment, but are benefiting from it without knowing it.The CBC ran a story that attacks REITs and greedy investment vehicles — the financialized investors that only seek profits — and they cited non-profits in places like Europe that operate on a very-fair 3.5% return. That's CAPREIT's return. That's exactly what we return to investors. 3.5%. Now, we earn 5.0%, but we reinvest that difference back into assets and climate change investments, ESG, which makes us ideal actors in housing. But because there's a perception of profit, we still get attacked. The CBC author of the story doesn't even live in Canada, they live overseas, and they're a freelance reporter. I read it with absolute shock. Actually, Carolyn Whitzman posted the story and in the comments you will see exactly what I just said. It's complete and utter bullshit. And yet, there's still an audience that wants to believe it and academia is really working against what I think is in the best interest of Canada, because it's easy for them to sit back and just attack anything with word "profit." Do you think this "war on profit" sentiment gets in the way of policy changes? I feel like, for example, the idea of carving out an exception from the foreign buyer ban for presales may not be politically viable.But it's the right thing to do. We desperately need it. We need money, so why are we labeling whose money it is? Where is it coming from? One camp will say the government, and we all know that that's not practical, but another camp will say, let the private sector do its job and create incentive for the private sector.The other thing too is the private sector was never charged with taking care of social housing. Never. But the government pretends that it is, that it's the private sector's fault. We have less social housing in Canada per capita than the US does. We have less. It's a pathetic failure of our so-called socialism that we could have less social housing per capita than the US does. Every party. It's not one party. Every political party has neglected the housing file for decades here now.The housing crisis in Canada, I see as two siblings. One sibling is supply, and the other sibling is affordability, and they are different. They're in the same family, but they are different. When it comes to dealing with people that are income-distressed, that is arguably a problem created by government and failing GDP per capita. This group has income distress and you cannot build market housing for income-distressed people. That is not a business that's viable.This supply piece is for the missing middle, and the missing middle can't access home ownership anymore. So, the average age of a first-time home buyer in Ontario is 40 years old. It's growing. And what's happened is the affordability crisis in Canada has created an implosion of birth rate. It's killed the family unit. People are not getting married. It's killing families, because they can't create a family unit. Coast to coast, if you're under 35, you've probably got a roommate, and that was not the case 20 years ago, where you finished school and you got a bachelor apartment if you had a good job, and you got a one-bedroom apartment rental if you had a great job. And eventually, you save up enough money to buy a home. That dream is gone in Canada. It's evaporated. Howard, do you mind if I ask: How old are you?30, going on 31.I don't know why your generation hasn't started a revolution. I honest to God do not know why. I think that under-35 cohort was responsible for the Justin Trudeau election of two terms ago and I think your generation should really be forming a full-blown revolution and not sitting back. This needs to be as loud as the activist community is on the war on profitability. It really needs to be properly organized and seeded. It's not about a political party attack, it's that as young Canadians, you deserve better and the future is being robbed from you, and you're being lied to by certain groups — not by government necessarily, but by these ideology groups that hate development.From my perspective as a journalist, I think a lot of people just don't have a full picture of how things work and it's more of an educational thing. I think a lot of people who have those beliefs may have their mind changed if they really understood how things work.I think what the freelance journalism community can be tempted into is reporting on the problem and reporting on profitability. That's easy. Blame big business. Profit is bad; that's why there's a problem. This is inflammatory, short-sighted thinking. What the real issue here is an inadequate amount of supply and investment in social housing. And an overzealous approach to immigration has put the country decades behind where it should be. I've got a chart that can show you the ramp-up since 2015 — there's a dip during COVID — and the explosion in immigration. We show this to investors and they call it the Chart of Schizophrenia. How can any government have been allowed to get away with doing this? As a REIT and CEO of a rental company, I should be giggling and laughing and applauding this, but as a Canadian I'm disgusted that this happened. Absolutely disgusted. This is not anti-immigration, this is just about the balance between supply and immigration. It was in balance for 50 years and then you saw what happened. The country was destroyed. I think people get it, but I don't know that they realize how horrific this is. The other problem for the under-35s is the over-50s are a disgusting cohort of Canadians in my mind, because a lot of them don't seem to care about the housing crisis — because they benefitted. They benefitted from huge appreciation and capital gains to fund their retirements and they don't seem to care about their kids. They don't vote that way. If you look at the voting trends, the housing crisis is like number five or six in the over-50 crowd and number one for the under-35 crowd. The disconnect here is so selfish. At what point did Canada become this selfish? You mentioned earlier that approximately 3% of rental units in Canada are owned by REITs. How has that number been historically?It peaked at 3%. It's in decline now and closer to 2%. And yet, I'll give you an example of how short-sighted these attacks are. Martine August and others, when they talk about nasty REITs, they count the number of evictions that we do. Well, of course when you own more apartments you evict more people. But if they look at the per unit building population, it's way lower. But they like to cite CAPREIT as the number one evictor of people in the City of Toronto. That's cause we're the largest owner by a multiple of five.The other thing is they love to talk about our rising average rents. Well that's because we're selling income-distressed buildings to non-profits and we're buying new construction apartments that are all market rents. The math is so manipulated to paint a nasty story. We're out there trying to do our best. CAPREIT, for example, has over 2,000 units of rent supplement. Most landlords won't let rent supplement into their building. We have over 2,000 units. We're number one in the country. They don't want to talk about that. We're the number one vendor — and the creator of, I would argue — the Rental Protection Fund. This was my idea. Why are we selling buildings to the private sector when we can sell the buildings to non-profits at a third of the cost and in income-distressed neighbourhoods where you don't have to displace people? Whether that will turn out to be a good program, I don't know, but we're a supporter of it. We're a perfect vendor for that because it's a very very patient closing. We're talking seven or eight months — while non-profits get organized — that they tie up a building for before it closes. There's no other vendor that would let a building drift out there for eight or nine months. We're a willing participant in that program because we want the buildings to be in the hands of non-profits and not the private sector. And climate change investments? We have ESG that the privates don't have. All you have to do is read our sustainability report and you'll see the long list of good behaviours that nobody wants to talk about. What's more sensational is "big is bad."Bringing it back to the investment landscape, can you describe what you're seeing in terms of Canadian real estate investment and where it is/isn't going and who is/isn't investing?There's generally a lack of capital, so it's not as competitive of a space to buy in. The new buyers, in general, across Canada are young entrepreneurs, young privates that are using CMHC's MLI Select program to buy buildings. There's virtually no institutional bid for what we call "value-add properties" — older legacy properties. Everybody's getting out of that game. The money for institutions is all in new construction, because none of us want the government challenge and it's less inclined to be regulated and you're less inclined to be attacked in the media. Any attempt to raise rents is not rewarded, so just go to market rent model and it's far more stable and simple. That's the general dynamic. You don't have to get the REITs out of the value-add business. We're leaving anyway and leaving as fast as we can. They are being bought by privates and the tenant reaction post-transaction is not good. Many tenants are in turmoil now that we've left and want us to come back and there's no way we'll come back. We will never buy those assets again. The government drove us out of there and at the end of the day we thank them for it because it's a terrible business. We're just not rewarded for being in that part of the sector and it's a big fail for Canada. We're happy to leave. We're not trying to get back in. But we were a better owner of those assets because of our ESG committments, because of our low leverage, and a whole host of factors. We did care about the communities and that will not be carried through with the new ownership structures, is my guess. Those guys are gonna reno-evict. We've never done a reno-eviction ever in our 27-year history. Not one.It sounds like you don't think we're gonna be able to get the $2 trillion in housing investment we need?Not a chance. Not a chance. We need international investment. We need foreign buyers. We need foreign capital. And the anti-profit movement needs to be completely eliminated. How do you build $2 trillion worth of housing when there's a big cohort out there that's anti-development? It should be the opposite. I don't know where these movements are of pro-development. It's hard to form a movement of young people that want more builds, but the movement has to be "My affordability has been crushed, federal government, what are you gonna do?" We need a pro-development young person movement, and even with that, you've got to overcome the plus-50s that have benefited from this housing crisis, so they're quietly sitting back and grateful their home has quadrupled in value.Besides the sentiment shift, are there some policy changes you think could make a difference?A capital gains rollover. If cap gains had a rollover program, specific to development or specific to non-profits, you can really see some interesting things happen. If the whole market became more motivated to vendor to non-profits, that would expand cap rates, that would make it even cheaper for non-profits to buy, and we would gladly take that money and put it into new development at CAPREIT. I said to the BC Rental Protection Fund I would've gone so far as to say every dollar that we pull out of buildings that we sell to the non-profits, we'll reinvest in new construction in BC. If all capital gains could be deferred by putting it into new construction, that could be very powerful to get the engine going in Canada.