When I first met Gina Gray, she was sitting on her couch, sunlight streaming into the room. As we talked, she gestured towards the window and the lake outside, explaining how much she loves the view from the 12th floor.

Gray, who is nearly 90, lives at 130 Gowan Avenue in Toronto’s East York neighborhood. She pays $998 a month rent for her one bedroom apartment, less than half the average amount in Toronto. 

But that’s on the verge of changing. Major rent hikes have been proposed by the building’s co-owners: PSP Investments, a crown corporation that manages a federal pension fund, and Starlight, one of Canada’s largest real estate firms. Through their partnership, they own thousands of rental units across Canada, most of them in the Greater Toronto Area, where they own more than 6,000 units. 

There is a striking irony here: the pensions of retired public workers are now being invested in making life for low-income renters—including seniors like Gray—even more precarious. 

These predatory practices are a direct result of pension fund managers betting on financialized real estate, increasingly at the expense of tenants across Canada. And the investment by one of Canada’s largest pension funds is far from an anomalous. Instead, it’s part of a much larger, emerging pattern of pension fund managers seeking to maximize profit, no matter the harm done to renters in Canada—or to communities around the world

In Gray’s building, Starlight is seeking a 4.2 percent increase, three percent over the amount permitted annually under provincial regulations. The company has applied for an Above Guideline Increase (AGI), arguing that renovations and other improvements to the building merit the rent increase. Since September, the residents at the building have been organizing to prevent the rent hike—but it’s only just the beginning. 

130 Gowan Avenue.

Pension funds cash in on housing woes

The events at 130 Gowan are a microcosm of a Canada-wide phenomenon: government pension funds are becoming big investors in financialized rental properties, tenants are forced to endure lengthy renovations, and rent increases loom large. 

The pension funds are typically silent partners, or indirect investors, their role obscured behind the branding of Canada’s largest corporate landlords. 

Montreal-based PSP Investments manages Canada’s fifth largest pension fund, investing retirement money for government workers, RCMP officers and soldiers. Little is known about the details of PSP’s partnership with Starlight, owing to the opaque disclosure requirements surrounding private equity investments. 

But Dr. Tessa Hebb, a Distinguished Research Fellow at Carleton University’s Centre for Community Innovation, explains that pension plans typically employ a “2-and-20” model with private equity asset managers like Starlight. In these arrangements, the asset manager receives a management fee equal to two percent of the assets managed, and twenty percent of profits over a benchmark rate of return. 

This model sets up pension funds as limited partners, who bring the money to the table. Corporate asset managers act as general partners, managing that money. And it is tenants who are punished, as both partners seek to maximize profits.

Examples abound. At the Heron Gate apartment complex in Ottawa, mass evictions and subsequent demolitions in 2016 and 2018 displaced hundreds of low-income renters, the majority of them racialized immigrants and refugees. Heron Gate is part-owned by Manitoba’s Teachers’ Retirement Allowances Fund, and part-owned by real estate giant Hazelview. 

Alberta’s teachers pension plan was part owner of buildings in Parkdale, Toronto, which were at the center of a housing struggle in 2017. Organizers successfully fought against proposed Above Guideline Increases, running a media campaign and coordinating with the Alberta teachers’ union regarding the actions of their pension fund. Eventually, the rent hike was rescinded. 

Pieces on a financial chess board

If this seems confusing, it’s because it is. The ownership structure of individual buildings under financialized arrangements is often unclear. 

“Pension plans and pension funds are a lot more like private equity than they are like publicly-listed companies, and this is even the case when the pension fund entity is, for example, a federal crown corporation like PSP,” said Kevin Skerrett, a CUPE researcher who is an expert in the operations of pension plans and real estate investing. 

Under Canadian law, private equity companies are subject to only the most minimal regulations in terms of what information they must disclose to the public, including profits and any in-depth information about ownership structure. Skerrett says the system has been designed to ensure this class of powerful investors a level of privacy similar to Swiss banking.

Though the public face of an apartment may display the branding of one company, like Starlight or Hazelview, it can have multiple owners. Each building is incorporated as an individual company with multiple owner-investors, and “structured like little mini-corporations that can be moved around like chess pieces on a board,” explained Skerrett.

When the federal government created PSP Investments in 1999 using the Public Sector Pension Investment Board Act, it legally required PSP to maximize returns, on top of the normal fiduciary responsibilities for pension funds to maximize profits. 

Skerrett explains that this proviso was put in place to prevent unions and union members from meddling in the functioning of free market mechanisms, lest they be inspired to become more actively involved in so-called “ethical investing.” 

“There were some campaign groups that came together and actually got established in the 1990s with the goal of trying to limit the range of what pension funds and other financial investors would consider as legitimate investments,” Skerrett told The Breach. “They and their lawyers and advisors agreed that one of the best ways to cut that off would be to say it’s illegal for the managers to consider anything but how to maximize their rates of return.”

PSP has a clear interest in playing down its role as co-owner of buildings that have become sites of struggles against displacement. “As an asset owner, PSP Investments partners with operators with recognized expertise and experience who are responsible for the day-to-day operations of the assets we invest in,” a PSP spokesperson wrote in an email to The Breach. In response to numerous follow-up questions, PSP Investments advised me to contact Starlight directly.

Inge Gerson, 93. Resident of 130 Gowan Ave. Gerson says rent increases are very hard on her because she receives CPP and OAS and they don’t go up with rent increases. If the rent goes up too much she won’t know what to do. She said she can’t afford an old age home.

Financialization matters

The last time I was at 130 Gowan, I met with Inge Gerson, who has also joined the fight against rising rents. She has lived in the building for twenty years; her apartment is charged with photos, plants, decorative objects, doilies and other ephemera. 

On the day we met, the television was on; she watched with closed captioning because she has difficulty hearing. I wrote my questions in a little notebook she gave me, which she would carefully read before writing out her responses. 

Gerson moved to Canada in 1972, and worked for CIBC in the communications department, for which she now receives a “very very small pension.” She told me that if Starlight carries through its plans to raise rents, she won’t be able to afford to stay. At 93, Gerson says she is too poor to move to an old age home. Her entire support network is at 130 Gowan. 

Over the past decades Toronto has emerged as a kind of crucible in the pioneering of building and tenant management techniques used by powerful corporate landlords like Starlight, often in partnership with public sector pension funds. The city has also become ground zero for innovative tenant organizing and resistance against rent increases, evictions, and other means of displacing poor and working class residents.

The financialization of real estate is what happens when asset management companies, Real Estate Investment Trusts (REITs), private equity firms and other financial enterprises buy up rental properties.

“It’s a semi-liquid market for entire buildings that can be constantly monitored and assessed for their risk profile and their potential for redevelopment and gentrification,” said CUPE’s Skerrett. 

And it’s a market that has grown quickly over the past 25 years. Financialized ownership made up zero percent of Canada’s apartment rental stock in 1996. Today it’s more than twenty percent. 

Some of the most extreme examples are in the Northwest Territories, Nunavut and Newfoundland, where REITs alone own 80 percent, 74 percent and 52 percent of all apartment units respectively. 

For its part, Starlight owns more than 61,000 units across Canada. It doubled its Canadian holdings when it acquired Northview REIT in 2020. 

The business model of companies like Starlight consists of buying poorly maintained buildings occupied by low-income renters in neighborhoods that are close to more upscale locations. They then do cosmetic upgrades to buildings and increase rents, waiting for lower income tenants to leave or be evicted. Eventually, the original tenants are replaced by higher income renters. In the industry, this is called “repositioning.

High tenant turnover is desirable for financialized owners, since the constant churn of tenants allows landlords to push rents up faster. In Ontario, weak rent control laws only protect renters during their tenancy, and no longer apply once they move out. 

A policy called “vacancy decontrol,” introduced by the Mike Harris government in 1996, removed limits on how high landlords can raise rents between tenants. Rents in Toronto rose more than 23 percent in the first three years following its implementation. 

Today, it’s common for landlords to justify above guideline rent increases by carrying out renovations that make life hard for tenants. Pearl Silverberg, who I met at Gowan Avenue, told me the balconies are now difficult to sweep because of the paint surface that has been applied to them. She says the balcony railings had been replaced fairly recently before Starlight replaced them again, and the reflectors Starlight installed with the stated intention of increasing heating efficiency were leaving many tenants cold in their apartments. 

Her complaints echo what I heard from Gina Gray, who explained that since Starlight added a kind of reflective foil panel to her heater, her apartment has been unpleasantly cold.

“It’s very common for landlords to ignore repairs and maintenance for sitting tenants—for people who are still paying the low rent—while renovating and upgrading the building when others move out,” said Dr. Martine August, assistant professor at the University of Waterloo’s School of Planning. “Neglect of buildings and of particular suites stresses tenants out, it makes their lives miserable and they want to leave.” 

But regardless of the rationales companies use to justify these rent increases, advocates say they should not exist at all. In an interview, housing advocate Philip Zigman told me AGIs are used to shift the costs of what often amounts to basic maintenance from highly profitable landlords to tenants.

In addition to making life miserable for tenants, financialized housing companies use renovations as a pretext to maximize rental income. This is what Starlight is doing at 130 Gowan. 

Between 2012 and 2019, Starlight Investments sought 205 Above Guideline Increases, affecting 16,100 units in the Greater Toronto Area alone. CAPREIT, the single largest Canadian financialized landlord, made 115 such applications over the same period, affecting 22,600 units. 

Raising rents is one part of a broader strategy focused on elevating property values as much as possible. Rising values are used to attract investors, and to obtain loans and lines of credit, which financialized landlords in turn reinvest, or use to become lenders themselves. 

Though it is tenants who pay the cost of rent increases and constant renovations, it’s financialized landlords that cash in. CAPREIT posted net operating income of nearly $750 million for the first nine months of 2021. Starlight, which is a private company, is not required to make its earnings public. But a look at Northview REIT, a publicly traded company Starlight acquired in 2020 gives us a clue. Last year, Northview posted a net operating income of almost $113 million. 

Chad Lebrun works a middle-class job with a decent salary but he can barely afford rent. If it goes up any more he will have to move away from Toronto, probably nearer to Brockville or Carleton Place, where he comes from. He said his entire life is in Toronto.

Struggles for the soul of the city

Toronto’s most emblematic housing struggles are often against corporate landlords.

During the pandemic, tenants at Goodwood—an apartment complex owned by Ranee Management in East York—came together to protect their neighbors from evictions. Organizing to resolve maintenance issues and prevent evictions at buildings such as 55 Triller Avenue, owned by Starlight, 1475 King Street West, owned by Golden Equity, and the West Lodge buildings, owned by Hazelview, is ongoing.

Activist groups and tenants are also starting to target the public sector pension funds that are trying to cash in on the financialized market.

The 2017 Parkdale rent strike was successful in keeping above guideline rent increases at bay. Tenants and activists joined forces and involved former Alberta teachers, whose retirement fund was a part owner with MetCap, in their struggle.

The involvement of PSP Investments in 130 Gowan Avenue inspired residents to appeal to those who are beneficiaries of PSP pensions, including retired members of the Public Service Alliance of Canada (PSAC). Tenants hope this will lead to a pressure campaign carried out together with union members. PSAC has since signaled support for Gowan residents, in a letter delivered to PSP CEO Neil Cunningham. 

Since active PSAC members are legally prohibited from having any say in how PSP invests their money, they’ve had to create a workaround, organizing campaigns against their own pension fund. This is the only lever available to them should they disagree with the way their monies are invested. 

On February 10, residents of 130 Gowan delivered a letter to William MacKinnon, a PSP board member, asking that PSP and Starlight rescind the planned rent increase. That same day, organizers in Montreal picketed outside of PSP’s head office on Rene Levesque Boulevard in solidarity. 

Though MacKinnon has since left the PSP board, residents are still waiting for a response from PSP and Starlight. 

As long as the threat of rent increases looms, elders like Gray and Gerson have little choice but to continue to fight to remain in their homes, and their community.

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