Roughly one-third of ministers sitting around the Liberal cabinet table own rental or investment real estate assets, according to their filings with the federal conflict of interest commissioner.
While fully legal, real estate experts say the holdings reflect the degree to which Canadians increasingly view real estate as a financial asset, rather than a place to live.
It also comes as recent data from Canadian financial institutions has demonstrated the growing role of investors in fuelling price growth — a trend Deputy Prime Minister and Finance Minister Chrystia Freeland billed this week as an issue of “intergenerational injustice.”
“One of the things that I am most concerned about as someone who — it shocks me to say this — is 53 years old, is the intergenerational injustice,” Freeland told reporters on Monday.
“We had a better shot at buying a home and starting a family than young people today, and we cannot have a Canada where the rising generation is shut out of the dream of homeownership.”
She was speaking at an event touting measures in the federal budget that the government says will tackle the sky-high prices pushing young Canadians out of homes, by both increasing supply and also cracking down on the financialization of real estate.
Financialization is a term increasingly being used in reference to investors buying up real estate — typically residential real estate that could otherwise serve as starter homes or affordable rental units — and then treating those as financial assets to generate profit, either through resale or raising rents.
According to a Bank of Canada analysis earlier this year, home purchases by investors have outpaced those of first-time homebuyers or even repeat homebuyers during the COVID-19 pandemic.
Investors account for one-fifth of home purchases in Canada, that analysis found, while the share of purchases by first-time homebuyers hit a new low last year.
Who owns what?
According to the disclosures filed with the federal conflict of interest commissioner, 12 of the 39 cabinet ministers — 31 per cent — hold real estate assets described by them in those filings as being either for “rental” or “investment” purposes.
That number does not include ministers who hold mortgages unrelated to rental or investment purposes.
Based on conversations with multiple government officials, those declared rental and investment assets range from homes being rented out as well as vacant land, properties used for tourism and properties purchased with the intent to move into them later.
All of that is legal and all of the ministers have fulfilled their duties under Canadian conflict of interest laws to report those assets to the federal conflict of interest commissioner.
Housing Minister Ahmed Hussen, tasked with implementing the government’s promised measures to tackle housing unaffordability, is among those who own a rental property.
His disclosure form states he is the sole owner of a rental property in Ottawa.
Freeland does not own domestic rental or investment property in Canada but does own two rental properties with her spouse in London, U.K. She also co-owns a residential property in Kyiv, Ukraine.
Innovation Minister Francois-Philippe Champagne owns two rental properties in the U.K. as well, while nine other cabinet ministers own properties domestically that are described by them in the conflict of interest disclosures as for rental or investment purposes.
Veterans Minister Lawrence MacAulay co-owns a farm rental property located in St-Peter’s Cable Head, Prince Edward Island.
Tourism Minister Randy Boissonnault holds what he described as a “nominal interest” in an investment property in Edmonton, Alta. A government official said the property is a condo that Boissonnault co-owns with a friend, and that he holds roughly one per cent of the ownership but doesn’t receive an income from the property.
Indigenous Services Minister Patty Hajdu is the sole owner of a rental property in Thunder Bay, Ont.
The most recent disclosure form for Gudie Hutchings, minister for rural economic development, lists her as jointly owning a real estate holding company in Little Rapids, Nfld., which one official said was related to her past work in the tourism industry before becoming an MP.
Minister for Seniors Kamal Khera is listed as the sole owner of an investment property in Caledon, Ont., and Justice Minister David Lametti is listed as the sole owner of a triplex described as a rental property in Verdun, Que. His office said he lives in one of the units, and rents out the others.
Minister of National Revenue Diane Lebouthillier stated in her forms that she holds a “significant interest” in a Quebec general partnership that rents out cottages in Sainte-Thérèse-de-Gaspé.
Harjit Sajjan, international development minister, owned a rental property in Osoyoos, B.C., until last year but recently sold that. He now jointly owns one investment property in Whistler, B.C., that an official said is a personal tourist accommodation in a commercial, not residential, facility.
As well, Fisheries Minister Joyce Murray disclosed ownership of two properties in her forms: one rental property in Riondel, a village in B.C.’s Kootenay region, as well as a parcel of vacant land in the region described as being held for investment purposes.
Parliamentarians owning property isn’t a factor unique to the federal cabinet — MPs from the Conservative Party, NDP and Bloc Quebecois all own real estate assets listed in their disclosure forms as for rental or investment purposes.
But as members of the cabinet, ministers are uniquely positioned in their ability to drive and implement policy change that could aim to lower prices.
“In an ideal world, one’s financial interest doesn’t bias their decisions, but people are human and obviously there is some bias there,” said John Pasalis, president of Realosophy Realty, a Toronto brokerage.
“No one wants to see their financial assets or their retirement plan drop in value, and I think we saw that in the housing minister’s argument several months ago about protecting the financial interests of mom and pop investors.”
Hussen told The Globe and Mail in February that the government didn’t want to take actions that would “negatively affect them because they are actually providing a rental service to a lot of people.”
He said in that interview those investors add to the housing stock by renting out their properties.
Pasalis, though, suggested they actually contribute to the challenge.
“If mom and pop investors were not rushing out and buying all of these pre-construction homes because they’re wealthier and they have assets and they have the income, they’d probably be more affordable for households who want to raise their family there long term,” he added.
Paul Kershaw, founder of Generation Squeeze, added that the cabinet minister’s real estate holdings reflect one of the core challenges fuelling sky-high prices in Canadian real estate: the deeply ingrained cultural view among Canadians of real estate as an investment.
“I think it reflects a broader cultural blindness to how we are literally addicted to high and rising home values in a range of ways as we plan our financial savings strategies for down the road,” said Kershaw, an associate professor studying generational equity at the University of British Columbia.
“I don’t want anyone to think these politicians are anything but hardworking. But they also are encultured, which gives us blind spots to see that housing has become this strategy to become wealthy and not just a place to call home,” he added.
“We’re at a moment where we need to choose between those two things.”
How should Canada tackle investment in real estate?
Data released by Statistics Canada on Tuesday showed that between 2019 and 2020, 31 per cent of Ontario’s residential and recreational housing stock was held by people who owned multiple properties.
In Nova Scotia, that number rose to 41 per cent while in New Brunswick and B.C., it sat at 39 per cent and 29 per cent respectively. That data also showed that in all four provinces, the top 10 per cent of property owners earned more than the bottom 50 per cent put together.
The data did not account for the white-hot surge in homebuying during the second year of the COVID-19 pandemic or the start of this year, which have both seen prices soar to record levels as frustration festers among a growing number of younger as well as middle-class Canadians who are priced out.
Fierce competition has sparked many to routinely waive home inspections or financing requirements, practices real estate experts have warned can put buyers at risk. In the budget, tabled last week, Freeland vowed to make good on a Liberal campaign promise to introduce a bill of rights for homebuyers.
That is expected to include a promised ban on waiving inspections.
While the budget contained a number of new measures targeting housing unaffordability, there remain questions over whether their proposals, including a two-year ban on most foreign buyers and a one-year tightening of the tax rules around flipping residential properties, will make enough of a difference.
Countries like Singapore, for example, have over the last year changed their tax system to put a heavier burden on those who buy up multiple residential properties: a 25 per cent transfer tax on the purchase of secondary homes, and 30 per cent on third or subsequent homes.
For foreign buyers, the purchase tax on residential properties in that country went up from 20 per cent to 30.
Some have suggested a longer ban on flipping homes, or tougher down payment requirements for either non-resident buyers or investors, which New Zealand has done recently, should be part of the range of measures needed to bring the unaffordability crisis under control.
“This is not a solution for all of our housing problems. Because at the end of the day, we still have this imbalance between supply and demand,” Pasalis said.
“But what it does is it takes some of the demand out of the market, at least the investor demand, and potentially makes those homes a little bit more available and affordable for people who want to buy them and occupy them themselves. And I think that’s a step forward that we should be moving towards.”
Hussen said in a statement on Wednesday that the measures announced in the budget aim to curb “speculation” and boost supply.
“By putting Canada on the path to double our target to build more homes over the next decade, in partnership with provinces, municipalities, and the private sector, we’re addressing the housing supply shortage across the country,” he said.
“These measures come in addition to crucial programs that will create more jobs, help house those most vulnerable in our communities, and help cool the market as we work to ensure that all Canadians have a safe and affordable place to call home.”
A government official who spoke with Global News said the budget shouldn’t be viewed as ruling out any measures that were not in the plan this year, and that a number of options remain on the table.
The government’s goal, that person said, is to take a “progressive” approach that could yet see more measures layered on top of those in the budget, depending on how well they work.
Economists from BMO and RBC both warned about the brewing risk of letting the overheated market continue unabated in notes to investors last year.
In the separate notes, economists emphasized the need for action that “immediately breaks market psychology and the belief that prices will only rise further,” noting the frenzy threatened to “destabilize the economy down the road if or when a correction occurs, with possible heavy costs for governments.”
Inflation is currently running at 30-year highs, prompting the Bank of Canada to raise rates in a bid to tamp down on the cheap lending rates that helped spur consumer spending during the pandemic.
On Wednesday, citing the need to bring consumer expectations back under control, the Bank of Canada again raised rates in what economists called an “oversized” hike of half a percentage point.
How — and if — that will work to begin cooling the housing market fire remains to be seen.