How Core entered Ontario’s single-family home rental market

There’s a century home on Water Street in Peterborough that was, until recently, an affordable place to rent — about $1,000 apiece for a three-bedroom or a four-bedroom unit.

For more than a decade, it was owned by a family who rented it to university students and others. But over the years, the house wore down — and the owners decided to sell.

In came the Avanew Single Family Rental company, the only bidder, who snapped up the home for close to $550,000. They put in new hardwood floors and spruced up the dated kitchens. When it was put back on the rental market, one of the units was listed for $2,500 — more than double the original rate.

Avanew, the landlord, is a wholly owned subsidiary of Core Development Group. Core, a Toronto-based condo developer, made national headlines last year after announcing plans to purchase $1 billion worth of houses, many of them detached homes, and use them as rentals.

The news kicked off a firestorm of controversy. Critics slammed it as a corporation profiting off a housing crisis, amassing wealth through ever-more-expensive homes while ordinary families are shut out. Core’s founder, Corey Hawtin, defended the model as a way to provide people with family-sized housing in neighbourhoods they otherwise couldn’t afford to live in.

A year since Core announced its intentions, and as Ottawa lawmakers promise a forthcoming review of major real estate owners, the Star took a closer look at how the business has been operating in Ontario — interviewing tenants, homeowners who’ve sold to Core subsidiaries, realtors, housing experts and representatives of the company, while examining sale records for the more than 80 homes purchased by subsidiaries so far.

That analysis paints a picture of the company’s fledgling rental home strategy — to secure moderately priced, older homes in smaller cities such as Peterborough and Kingston, then fix them up, adding the likes of new floors and soaker tubs to make them more attractive.

The company adds extra units, where possible, to boost the number of places it can lease. These units are then rented out, in many cases, significantly above average market rent, the Star found.

These are the kinds of prices housing advocates say are only affordable to better-off families, including those just priced out of buying a house.

While early criticism of Core raised alarm about its strategy taking away home supply from potential buyers — and drew parallels with companies that have employed similar models in the U.S. — advocates are now concerned about Core entering cities with low vacancy rates, increasing rents in tight markets and making it harder for tenants searching for affordable rentals.

“When these investors are making profits it’s coming out of the pockets of renters,” said Paul Armstrong, a housing advocate in Peterborough.

“This is a prime example of how inequality grows.”

When Core disclosed its plans for the Canadian market last June, the reaction was immediate and explosive. Several realtors, mortgage brokers, politicians and housing advocates raised concerns — many of them focused on whether ordinary families could compete with a large corporation in the home-buying market, especially as a number of Ontario cities have more demand for single-family homes than available supply, a situation that has pushed purchase prices higher and higher. They feared Core’s converting of homes to rentals would further that squeeze.

With a goal of buying 4,000 rental units in Ontario, the Atlantic provinces, B.C. and Quebec, property records show Core has so far acquired at least 81 homes in Ontario, through various subsidiaries. Most are houses, with some multiplex buildings, spread across Peterborough, Chatham, Kingston, St. Catharines, Cambridge, Barrie, London and Hamilton.

Looking at roughly six dozen homes the company has purchased, the Star found the average home price — excluding houses transferred between subsidiaries — was slightly more than $550,000. In places such as Kingston, those homes fell below the benchmark price of a single-family home, which the local realtors’ association says was $621,500 in April.

Core says it’s primarily buying homes that were previously rentals, and vacant at the time of sale. Where there were tenants, some have told the Star they were offered thousands of dollars if they gave up the right to return after renovations, with some saying the amount didn’t make up for higher rents they faced elsewhere.

By analyzing roughly 20 online rental listings for post-renovation Core properties, the Star found many had been listed for more than the local average rent for a similarly sized unit — with some Core units more expensive than the average found among the usually higher price for new listings.

The activity of big investors has recently caught the eye of Ottawa lawmakers. In its spring budget the federal government promised a review of large real estate owners.

Although new for Canada, Core’s strategy is one that companies have widely used in the U.S., where corporate landlords have been buying swaths of houses to use as rentals for years, with one U.S. economist saying those homes are often rented to priced-out would-be buyers.

David Amborski, an expert in urban and regional planning at Toronto Metropolitan University, is skeptical many other Canadian companies will follow Core’s lead. “For me, I still think it’s at a bit of a risky state because of the costs involved,” Amborski said.

But John Pasalis, president of the real estate brokerage Realosophy, worries about the U.S. model creeping into the Canadian market, and what it means for ordinary families.

“I think it’s troubling, the direction we’re going in,” Pasalis said.

In Kingston, a house in Rideau Heights offers insights into Core’s approach.

The home at 130 Weller Ave. was owned by a family, listing agent Kim Cucheran said. The basement unit didn’t meet all the criteria for a market rental, so the family let it out to nephews and grandsons who needed it, charging around $500 a month.

Last year, the family listed the home for sale for $379,500. Within about four days, Cucheran said the owners received three offers, all within about $40,000 of each other. Core subsidiary Avanew won with an offer of $437,000.

Recently, Avanew’s Facebook page showed the lower level two-bedroom offered for $1,799 a month. For the main level three-bedroom, the company asked $2,399.

“They’ve done some renos and they look gorgeous,” Cucheran said. “But downstairs, wow. I can’t believe they’re actually getting that rent.”

According to Canada Mortgage and Housing Corp. (CMHC), average rent for a two-bedroom apartment or row house in Kingston was $1,408 per month as of October 2021.

In Peterborough, property records show Avanew spent $500,000 last year to buy 265 Lee St. Recently, its lower level two-bedroom was listed on Facebook for $1,850 and its main, three-bedroom unit was listed for $2,650. CMHC said October’s average two-bedroom apartment or row house in Peterborough cost $1,305, and three-plus bedroom was $1,365.

Among prices for newly listed units in Peterborough, found between January and April this year the average two bedroom, including non-basement units, had an asking price of $2,106, and the average three-bedroom cost $2,350.

Armstrong, the Peterborough housing advocate, said in order for a household to “affordably” rent a unit for $1,850 a month — affordable, CMHC says, means monthly housing costs don’t exceed 30 per cent of their income — a household would have to earn $74,000 a year. For the $2,650-a-month three-bedroom, they would need $106,000.

The median household income in the Peterborough area was $64,777, as of the 2016 census.

Speaking with the Star, Core reiterated its business plan — noting how many first-time buyers have been priced out of the single-family home market. The company sees it as the largest supply-and-demand gap for rentals. According to the 2016 census, there were 1.56 million rental units in Ontario — of which, 1.2 million were purpose-built apartments, condos and row houses, while just 352,430 were single-family homes or duplexes.

A business chasing profit is normal, but critics have raised particular alarm about those profits coming out of housing — treating homes as a vehicle for building wealth, rather than being a social need for people.

Core is more about the former than the latter, critics argue.

“Remember, they are coming in for a reason. They’re coming to extract the honey from the hive. They’re not interested in everybody getting a fair share of the honey,” Armstrong adds.

“This shouldn’t be happening with something so vital to us all as housing.”

Robert Justin, 50, a longtime Peterborough resident, says he doesn’t feel exploited. He’s just happy to be able to rent part of a large house for his family.

In mid-March, they moved into a three-bedroom bungalow purchased by Avanew for $535,000 last year.

Justin, who works part-time as a delivery company dispatcher, shares the unit with his wife, Patricia, who receives disability support payments, their daughter and granddaughter. Justin describes his family as low income.

Together they bring in about $4,000 a month. Their rent is $2,400 a month — or 60 per cent of their monthly income. Justin doesn’t know who rents the two-bedroom unit in the basement.

He says there’s lots of student housing in Peterborough, but the market is tight in terms of house rentals for families.

“At our last place we converted a living room to a private bedroom for my daughter and granddaughter using a wall unit that was large enough to section off the living room,” he says.

“We wouldn’t be able to afford to buy a house like this in this neighbourhood.”

When it comes to pre-existing renters in properties Avanew purchases, the company said compensation is being offered to tenants who depart for good as well as to those who indicate a desire to return. The amount each receives “varies,” the company added, noting it is also offering assistance to those needing help to relocate.

Stacey Montemiglio (right) lives with her father Lorne and daughter (not pictured) at their home in Peterborough that was recently bought by a Core subsidiary. She has been offered $5,000 to give up her right to return at the same rent after renovations, but says the money won't make up for facing higher rents elsewhere.

But Stacey Montemiglio, who lives in a Peterborough multiplex the company purchased in March, says she’s not going anywhere.

The building was listed for $899,000, and went for $1 million. Montemiglio says she was offered $5,000 to give up her right to return at the same rent, but declined.

“You can’t rent a one-bedroom apartment for under $1,000 in Peterborough, let alone a two bedroom,” the part-time receptionist who receives social assistance told the Star.

She rents her unit for herself and her daughter for $878 a month. Her dad, who recently had a stroke and is partially paralyzed, is also staying with them.

Peterborough currently has a one per cent vacancy rate, among the lowest in Ontario, according to CMHC.

In Kingston, 83-year-old Sylvia Richards, who is ailing with a lung disease, took $5,000 to leave permanently and used it toward first and last month’s rent for her new place. The house she moved out of, in which she rented a two-bedroom unit for $830 a month, sold to Avanew last July for $568,000.

Now, she pays $1,379 a month for a smaller two-bedroom elsewhere in the city.

“I had a nest egg for my son, and now I’ve had to dig into it,” Richards said.

Toronto Metropolitan University’s Amborski says buying in Kingston and Peterborough would be appealing for a company like Core because that’s where there’s financial return.

Unless an investor’s strategy was to bank on longer-term capital appreciation and shoulder losses month to month, parts of the GTA wouldn’t make sense, he said.

Cucheran, the Kingston realtor, said she’s seen an uptick in calls from out-of-town investors. When players like Core come in, Cucheran believes it makes it harder for locals to compete — in a city where she’s already seen more than a dozen people vying for homes listed under $600,000.

“We currently have so many first-time buyers here, trying to get into home ownership and have saved for a long time to build their future,” Cucheran said. “While we absolutely have the need to add to the rental market here in Kingston, we also need affordable rental housing.”

In the U.S., interest in single-family homes as rental investments picked up after the housing market crash of 2008, says Amborski. And it’s remained lucrative.

U.S. brokerage Redfin says investors bought 18.4 per cent of homes countrywide in the last quarter of 2021 — more than 75 per cent of which were single-family homes.

“Partly, the people who are going to rent from them are the ones who were trying to buy, and got frustrated after losing out on offers for multiple months,” said Redfin economist Sheharyar Bokhari.

In Canada, there have been indications of a growing investor interest in single-family homes.

In December, the Canada Pension Plan Investment Board announced a joint venture with Greystar Real Estate Partners to invest in single-family rentals in the U.S. In an interview with BNN Bloomberg, CPP’s global head of real estate said they weren’t currently focused on houses in Canada, but he “can imagine that this segment could grow.”

Ontario already has “very strong demand” from real estate investors, says Pasalis. He worries that increased attention on single-family homes will only gnaw further away at affordability.

Amborski believes Core is still testing the Canadian market — and remains skeptical that many other companies will follow suit. At the scale of their current operations, spread out over multiple cities, he doubts Core’s business will change house prices.

“I can’t see a ripple effect unless this became very financially successful,” he said.

Core, meanwhile, insists they are long-term, committed investors trying to bring homes to Canadians by investing in a segment of the market that has been “ignored by institutional investors for decades” — single family homes.


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