A recent report by SHARE, a non-profit shareholder advocacy organization, revealed some unsettling information about residential real estate investment trusts, known as REITs.
These trusts, which own and often operate profit-driven residential real estate (i.e. apartment buildings), could be contributing to the country’s housing crisis. But investors don’t have enough information to know one way or another, the report found.
The data they were able to gather from Canada’s six largest REITs, though, suggests these trusts’ investment strategies could be pricing people out of housing. New tenants in turned over units paid an average of 13 per cent higher rent in properties managed by the four REITs that provided this data. Tenants moving into newly renovated units paid a whopping 29 per cent more on average than previous tenants (in properties managed by two REITs who shared this data).
The report also found investors are getting little to no information from REITs about eviction rates, property maintenance, and other factors around securing people’s human right to decent housing.
Are foundations and REITs values-aligned?
In a recent Future of Good story, Gabe Oatley reported that while “Canadian foundations and charities aren’t required to disclose their investments…interviews with experts suggest residential REIT holdings are common.”
Meanwhile, Canada’s philanthropic foundations are under increasing scrutiny to ensure their investments align with their missions and beliefs. The troubling practices revealed by the SHARE report have sparked debates over the role of REITs in exacerbating housing affordability challenges and contributing to the erosion of tenants’ rights — and therefore, foundations’ complicity.
All of this raises a fundamental question: If foundations divest from REITs, where should they channel their investments?
Community bond campaigns: a community-led, ethical way to invest in housing
Community bond campaigns present a compelling solution for foundations seeking ethical and impactful investment options. (New to the world of community bonds? Learn about the model here.)
By creating a dedicated portfolio for community investment through community bonds, foundations could actively address affordable housing challenges while fostering community development at the same time. Community bonds are issued by affordable housing providers (you can read about six of them operating across the country here), bought by retail or institutional investors, and repaid with interest rates and timelines set by issuers. This gives community groups who want to address the housing crisis a flexible way to raise the capital they need, while offering returns directly to their community members. And at Tapestry, we work with these groups to make sure there’s a solid plan to generate revenue and repay investors before launching.
Here are four big reasons they’re a values-aligned investment for foundations:
Community bonds are transparent
Community bond issuers consistently report on progress to investors throughout their projects, allowing investors to clearly see where their money is going, and make sure they’re invested in truly ethical, affordable housing. This transparency fosters trust between foundations, issuers, and communities, ensuring that funds are making a dent in the housing crisis.
Investing in community bonds directly supports community-driven and community-focused initiatives that prioritize long-term and sustainable affordability in communities. Through community bonds, foundations can invest directly in grassroots groups with firsthand knowledge of their communities’ housing struggles and effective solutions.
They facilitate community engagement
One of the biggest advantages of community bonds is the opportunity for foundations to engage directly with communities at the forefront of the housing crisis. This engagement isn’t just financial — it’s about creating connections, understanding needs, and fostering genuine impact. Foundations can play a pivotal role not only as investors but as catalysts for positive change within communities.
You can help catalyze a community investment movement
At Tapestry, we envision a future where retail investors can put their money into bettering their communities, and the returns from those investments then contribute to the community’s overall economic development. If you believe in this future, too, an investment from your foundation could help build excitement and confidence in community bonds. It’s an invaluable contribution to the individual community bond campaign you invest in, and to the movement toward ethical investment in Canada.
In a landscape where foundations are increasingly called on to uphold ethical responsibilities, the choice of investment vehicles carries immense weight. Transitioning from REITs to community bond investments offers foundations an opportunity to stand as beacons of truly ethical investment — and make a real impact on the housing crisis affecting the daily lives of so many across Canada.