What are REITs? 

Real Estate Investment Trusts (REITs) were introduced in Canada in 1993 as an investment tool and are widely used globally. Similar to mutual funds, REITs allow investors to pool their money to buy and own properties collectively, providing access to the benefits of property ownership at a level suitable for each investor. REITs can own residential, office, industrial, and other types of properties, collecting rent to manage the properties and distributing regular dividends to investors. 

Many Canadians invest in REITs through personal portfolios, mutual funds, or pension plans. These investments contribute to retirement funds by providing reliable returns. REITs often hold multiple properties, offering better diversification and reducing risk for investors. 

REITs and the Canadian Housing Market 

Canada’s rental housing stock is aging. In Ontario, over 80% of existing rental units were built before 1980, many of which require significant upgrades to infrastructure like heating systems, balconies, parking garages, and elevators. There is also increasing pressure to reduce energy consumption and greenhouse gas emissions in older buildings. 

With homeownership becoming less attainable for many Canadians, strong and stable rental housing is essential. REITs are uniquely positioned to make critical investments in sustaining and modernizing Canada’s rental housing supply to meet the needs of a growing population. 

 REITs Provide Safe and Secure Homes 

REITs prioritize customer satisfaction by fostering strong communication and collaboration between residents and property management teams. Their goal is to ensure residents feel safe, secure, and comfortable in their homes and communities. 

How Are REITs Taxed? 

REITs use rental income to cover property expenses such as mortgage payments, property taxes, and utilities. They then distribute the remaining net income to investors. 

In a traditional corporation, net income is subject to a 15% corporate tax before being paid out as dividends, which are further taxed at approximately 10% for the investor. This results in a total tax of about 25% on net income. 

By contrast, REITs are exempt from corporate-level taxes. Instead, their income is passed directly to investors as ordinary income, which is taxed at the investor’s marginal tax rate—ranging from 20% to 54%, depending on their total annual income.