People of Toronto – if you have a decent-sized rental unit, don’t move! The competitive rental market in this city continues to escalate.
RBC economist Robert Hogue released a recent report that estimated the Toronto area had a deficit of 9,100 rental units at the end of 2018. Meanwhile, the number of new residents looking for a place to live spiked by 22,000 year-over-year. As Toronto’s population continues to rise, the demand for rental units will continue to increase.
But construction can’t keep pace with what Hogue suggests should be the building of up to 26,800 new units a year. There is a shred of good news: Toronto recently hit a 25-year high of purpose-built 4,300 rental units.
“As long as the vacancy rate is below 3 per cent, there is going to be constant upward pressure on rents,” Mr. Hogue told the Globe and Mail.
“For me, it’s hard to imagine a situation where suddenly there is going to be some lessening of rent increases in the context of a very, very tight rental market.”
While the report’s statistics on newly completed rental units only amount to 20 per cent of required builds – it’s difficult to measure demand precisely because of the constant influx of new people into the city.
A newly-released analysis from Ryerson University’s Centre for Urban Research and Land Development showed the city’s exponential growth. It’s currently the fastest growing city in the U.S. and Canada.
Add population growth to a shrinking rental market and the consequence is a huge housing crisis, something which Toronto has been on the brink of for years.
The Toronto region is facing the largest apartment rental shortage of any major city in Canada as both inadequate new construction and soaring population growth are expected to worsen an existing shortfall and push rents even higher.
Hogue says Toronto needs to create a package of policy measures, like tax incentives for rental construction and increased regulation of Airbnb short-term rental properties, to increase housing inventory.
The RBC report used data for the Toronto census metropolitan area, which is a wide region stretching around the city of Toronto that includes communities such as Brampton, Mississauga, Richmond Hill and Pickering. And while construction on 15,800 condo units was completed in these districts, it’s hard to measure how many of these were purchased for rental purposes or not. However, StatsCan determined that 37.9 per cent of condos purchased in Toronto are investor-owned.
What should concern renters most is the predicted increases in cost. It’s no urban myth that landlords will take advantage of a rental shortage. This is in line with Hogue’s report which shows that two-bedroom rents have risen by 4.5 per cent in 2018 and condos rose 4-per cent. He argued that Toronto policy makers need a clear strategy similar to Vancouver’s 10-year plan to improve housing affordability, with a target of hitting a 4 percent rental vacancy rate.
“If our starting point is an affordability crisis, the public should be open to having a set of measures that might be out-of-the-box, for a period of time at least, to get things going,” he said.
The question facing renters is whether Toronto is worth the rental cost to live there.