For those concerned about spiraling rental rates in the GTA, the latest report from the Toronto Real Estate Board did not make for a happy read.
Data from TREB showed there were 5,717 condominium apartment rental transactions during the last three months of 2016 – a 5.8% reduction compared to the same period in 2015.
That drop did not reflect a fall in demand, however; rather, it was clear indication that the city is experiencing a real supply shortfall for rental units. The number of Toronto condos listed for rent during the fourth quarter of 2016 shrank by more than 14% to 9,545.
Rental Price On Their Way Up
The basic laws of economics dictate that when demand outstrips supply, prices will only go one way. Such is the case in Canada’s largest city where rent for an average one-bedroom condo apartment was $1,776 in Q4, representing an annual increase of 7.4% compared to the fourth quarter of 2015. Over the same period, two-bedroom rents increased by 8% to $2,415.
Addressing the findings, Director of Market Analysis and Service Channels at the Toronto Real Estate Board Jason Mercer stated that supply at all levels – including condos, detached and townhouses in Toronto – was becoming a major concern.
“It is clear that supply has been an issue in the condominium apartment rental market. TREB has spoken about the need for different levels of government to turn their policy focus to the supply side of the market. This relates to both ownership and rental properties in the GTA.
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An Issue Decades in the Making
The Federation of Metro Tenants’ Associations is a collective that assists renters throughout the city, providing a host of services including a tenant hotline, outreach service and education workshops. Federation Executive Director Geordie Dent says the current problems with housing supply can be traced back to political decisions made decades ago.
“The FMTA has long pushed for a return of vacancy rent control and the elimination of above guideline rent increases,” he says. “We would also like to see an end to the 1991 exemption to rent control and more supply to help with the low vacancy rates – which is the number one factor pushing up rents.”
Not Enough Rental Purpose Housing in the Works
Anyone that has noticed Toronto’s rapidly changing skyline, ubiquitous cranes and new developments popping up all around the city might be surprised to hear there is a real shortage of rental properties. In Dent’s opinion, the problem isn’t that there isn’t enough building happening – far from it in fact.
“Over the past 10 years almost 70% of construction in Toronto has been condo,” he says. “Tax incentives and financing mean this is a more profitable endeavor for many developers. There are literally hundreds of buildings being built in Toronto right now…probably slightly more than in even New York in terms of current development.”
Simply building more and more condos isn’t a solution, in his opinion, as often these properties are unsuitable for larger families.
“The issue hasn’t been development…it’s what’s being developed,” says Dent. “The 1950’s programs that highlighted rental housing are long gone and similar new programs (like the ones that built many co-op units in the 1990’s) have not been created.
Time to Improve Policy
Toronto is not a city renowned for its long-term planning and ability to get large-scale public projects moving. But this hasn’t always been the case, as Dent points out. When searching for solutions to the current housing shortage, one need not look to Berlin or Auckland, but much closer to home.
“There are certain policy options that I think would benefit Toronto immensely right now, and I think the best examples could be found in Toronto itself in 1950,” he says. “This involved a huge amount of money being funneled into the development of affordable rental housing through federal CMHC programs to incentivize the building of housing.”
