Rent prices in Toronto are expected to keep rising until something major changes
A comprehensive new report on the state of Canada's rental market paints a grim picture of Toronto's future — one in which too many people compete for too few living spaces, driving up prices, exacerbating homelessness, and pushing young professionals out of the big city into smaller towns (which will incidentally soon be plagued by the exact same problems of demand outstripping supply).
Long story short: If we as a city, province and country don't build tons of new rental units, and fast, millions of people are screwed. On top of the millions who are already screwed.
"Too many renters in Canada cannot find a place to rent," reads the fourth annual Rentals.ca Rental Market Predictions Report, which compiles the insights of 24 experts (economists, analysts, investors and regulators) from across the country.
"While the problem is not this easy and nuances abound, basically the Canadian population is way outpacing the number of places available to rent," the report's intro continues.
"Most Canadians and politicians have agreed for a while that more homes need to be built... housing programs and policies have been enacted at the federal, provincial and municipal levels, but rents continue to rise, supply remains insufficient, and homelessness drags on."
In Toronto, specifically, average rents are forecast to rise at least 11 per cent by the end of 2022. This would take monthly rental fees up to approximately $2,495 by December of this year, on average, for all property types combined.
It’s time we move from housing affordability to rent affordability.— Nitin (@matrix0683) April 28, 2022
The report's authors conclude that average rent prices will continue to rise in almost every large Canadian market throughout 2022, regardless of whether the COVID pandemic recedes or reignites.
"The daily pandemic news put the housing crisis in the background for a while," said Rentals.ca CEO Matt Danison in the report, which was released on Tuesday. "But now as COVID-19 recedes, we are talking again about our lack of supply. This problem will keep rents on the rise in most of Canada for the rest of the year."
If supply is our biggest problem, the solution would logically be to build more homes... right?
Most experts would reply to that question with a wholehearted yes, but many also warn that it'll be nearly impossible to build enough rental homes to satisfy current demand levels — let alone all of the demand to come — thanks to such factors as political infighting, rampant NIMBYism and lengthy bureaucratic processes.
At least a few of said experts floated solutions within the report which, while radical sounding, might offer some people in lower income brackets a chance at not being put out on the street — and keep frustrated urban millennials from fleeing Toronto and driving up rent prices all over Ontario.
"The freight train is coming our way, but not doing anything about it is no longer an option," says Tony Irwin, president and CEO of the Federation of Rental-housing Providers of Ontario (FRPO).
"It's hard to ignore... affordability is becoming a bigger issue, especially with inflation rising."
In a new report @CMHC_ca says that “supply is the biggest issue affecting housing affordability”, particularly in Toronto. Action cannot be delayed. We must all work together to ensure that more housing is built for all Canadians. Read the full story here: https://t.co/22NFvlRbb6 pic.twitter.com/1OwJG0kkrC— Let's Build Ontario (@BuildOntario) May 4, 2022
Irwin, like many experts, says that housing supply needs to increase in a big way and fast. To do this, he says "we need action from all levels of government to help solve the problem." We also need to see some changes in attitude among policymakers.
Some suggestions, per Irwin: streamlining the development approval process, building infill development on existing sites, reducing taxes and fees for new rental projects, and updating "out-of-date" zoning bylaws to snuff out NIMBYism.
"In a recent survey of 1,500 GTA residents conducted by the Building Industry and Land Development Association and the Toronto Real Estate Board a vast majority (87 per cent) agreed that housing affordability can be improved by new developments," wrote Irwin in a Linkden post a few months back.
"However, a majority of respondents also indicated that they were against new developments happening near their place of residence."
To counter this problem, Irwin recommends policy changes like "approving more as-of-right zoning and density incentives for purpose-built rental projects in communities where rental housing is needed the most" and "updating outdated parking requirements for downtown centres as many residents now living there don't drive."
In Toronto, NIMBY = BANANA. Build absolutely nothing anywhere near anyone.— enviromo (@enviromo) May 3, 2022
Another interesting take in the rental market predictions report comes by way of Max Steinman, CEO of Rentsync.
"It's likely we will see an accelerated trend toward commercial — primarily office — to residential conversion projects because of their inherently shorter go-to-market timeline," he predicts of the next two to three years.
Steinman argues that these types of office-to-residential conversions would address "the under-supply challenge continuing to persist in the residential rental market, while also addressing the oversupply of office space because of the COVID-19-induced work-from-home employment culture."
Even as employees slowly start to repopulate offices in the downtown core, vacancy rates remain historically high with no end to the glut in sight as many companies pivot to remote or hybrid work models.
Steinman suggests that if municipalities cut the bureaucratic process down to make office-to-residential conversions happen faster, downtown cores all over the country would be "rejuvenated, enabling retail (restaurants & shopping) to thrive under the new post-pandemic reality."
"The pandemic accelerated the work-from-home phenomenon, and it's here to stay, even if partially for some businesses," concludes the Rentals.ca report.
"Companies will be shedding some office space as a result. How long will it take cities to rezone to convert some of this space into lofts for work, live, shop and play areas?"
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