Experts say Toronto is in big trouble unless thousands of rental units are built fast
The Greater Toronto Area (GTA) is facing a critical shortage of rental units, and experts are warning that the region's deficit in rentals could double to an astonishing 177,000 units in the next decade.
A new report released Thursday by the Building Industry and Land Development Association (BILD) and the Federation of Rental-housing Providers of Ontario (FRPO) urges all levels of government to act fast with policies that promote purpose-built rental development and address skyrocketing demand in the fast-growing region.
Dave Wilkes, President and CEO of BILD, explains that a 2018 surge in new rental development is not sustaining momentum, saying, "unfortunately, we are just not seeing purpose-built rentals being built at the scale that is required."
Wilkes states that this stalling effect "comes down to the economics of building and managing these type of buildings."
The report raises alarm bells, stating purpose-built rentals represent approximately one-seventh of all housing stock in the region, but less than half of that fraction of units are available for rent.
Compounding this issue is the average age of GTA purpose-built rental buildings. Almost 90 per cent of units were constructed in the span between 1960 and 1979, when 223,954 units were constructed — mostly within the sprawling slab-style tower-in-the-park developments that have become ubiquitous in Toronto.
That massive influx of units came to an end in 1979, when the Residential Tenancies Act was enacted, placing rent controls on units that limited landlords' effective licences to print money.
A new wave of rent construction came in 2018, corresponding with Doug Ford's election and the elimination of rent controls in new-build developments.
But this wave barely measures up to the 20th-century boom that came before. Just under 23,600 purpose-built rental units were built between 2000 and 2022, falling a staggering 200K units short of the 1960-1979 building frenzy.
This current boom may have plateaued, the report citing a number of reasons why developers aren't as keen to build as they were decades earlier.
According to the BILD/FRPO report, purpose-built rental construction in major urban centres like Toronto can be more costly for developers to finance upfront and are less lucrative and immediate than the boatloads of money coming in from condo sales.
It also notes the length of time it takes for a rental property to turn a profit, and the added strain of taxes applied to purpose-built rentals.
"In order to tackle our housing crisis, we need to build much more purpose-built rental housing, faster," said Tony Irwin, President and CEO of FRPO.
"The majority of Ontario's purpose-built rental housing stock was built before 1980, so new units are essential to provide more choice and take the pressure off aging units," continued Irwin.
Irwin urges all levels of government "to make new purpose-built rental housing a priority and to create a policy regime that recognizes the unique nature of this type of development."
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