A confluence of government policy, affordability and extremely robust market fundamentals is impeding movement in Toronto’s rental market.
The Canada Mortgage and Housing Corporation’s Rental Market Report for Ontario revealed that Toronto’s vacancy rate hasn’t changed much from the 16-year low recorded in 2017 (increasing from 1% to 1.1% in 2018), and that the year-over-year turnover rate recorded in October dropped.
“The rental market is still pretty tight,” said Jordan Nanowski, a CMHC senior market analyst. “We saw average rent increase 4.9% and people are staying put as a result. The turnover rate has decreased substantially from 14.5% to 11.2% because the average rent for vacant units are 18% higher than occupied units.”
The prohibitive cost of homeownership in the GTA has forced a growing number of residents into rental accommodations, of which the dearth is dire, and coupled with population inflow there simply aren’t enough rental units available.
“It’s a function of very strong demand that is exceeding supply,” said Nanowski. “A lot of factors go into it, like housing prices, which are more expensive in the GTA, so people are turning to renting instead of owning. It’s also that there are higher borrowing costs with interest rates rising, and there’s less mortgage availability because of OSFI’s [Office of the Superintendent of Financial Institutions] new stress testing.”
The GTA’s vigorous economy is attracting people from all over—many of whom are permit workers flocking to rentals, further straining supply—including international students, and year-over-year growth in the number of renters has reached a two-decade high.
“Supply is lagging behind,” said Nanowski. “The number of occupied units grew faster than the rental market did in the past year, and that’s typically the result of a tighter market.”
According to Tony Irwin, president and CEO of the Federation of Rental-Housing Providers of Ontario, the Fair Housing Plan’s reintroduction of rent control choked the supply pipeline and exacerbated what had theretofore been a critical issue.
“We calculated, based on feedback from our members, approximately 20,000 units impacted,” said Irwin. “Projects were either cancelled or converted from apartments to condominiums. The bottom line is thousands of units were impacted by the policy change.”
Ontario’s Progressive Conservative government has repealed rent control for new builds and Irwin is confident that it will help suffuse the market with supply.
“We believe that move will have an immediate impact, in terms of builders moving forward with projects that were put on hold when the previous government brought back rent control,” said Irwin.
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
