The Toronto area needs to add 8,000 purpose-built rental units per year in order to bring an end to an “over-reliance on private condominiums” in the rental market and restore the vacancy rate to a healthy level, a new report from the Ryerson City Building Institute suggests.
The 41-page report completed in partnership with the Evergreen Institute reveals that the Toronto area rental market has grown by only 2,400 purpose-built units over the last decade. During the same time period, the number of private rental condominium units has grown by 76,000.
The result, the report says, is a rental market that is “entirely reliant” on privately-owned condos, where rents are often higher and tenants can be more vulnerable to evictions.
“Adding 8,000 new purpose-built rental units per year on to the market will help ensure that we do not continue to become more reliant on the secondary market – ensuring that approximately 64% of our rental market will be provided via purpose-built rentals,” the report states. “This reduced reliance on secondary rentals will improve housing stability for tenants and vacancy rates through ensuring a strong, stable, and predictable supply of new apartment units.”
A healthy vacancy rate is generally classified as one hovering around 3 per cent but the report points out that Toronto has “consistently” had a much lower vacancy rate over the last seven years, a period during which the vacancy rate for purpose-built rental units has never surpassed 2.1 per cent and the vanacy rate for rental condominium units hasn’t topped 1.8 per cent.
It says the low vacancy rate is partly to blame for rents that have risen by an average of 3.5 per cent annually since 2011, an increase which easily exceeds the rate of inflation.
Though the report concedes that it will take five to 10 years to get the vacancy rate to a healthy level, it says there are some positive signs on the horizon, including an estimated 25,000 purpose-built rental units that are currently in the development pipeline.
“Despite the challenging economics of rental development when compared to condominiums, in the last two years purpose-built rental construction starts in the Toronto Area have risen to levels not seen since 1993,” the report says.
In order to further encourage the construction of purpose-built rental units the report makes several recommendations including:
- Allowing developers to claim HST credits to offset the HST spent constructing rental buildings
- Having the provincial or federal government develop an agency to provide a “one-window” service to developers to access existing incentives
- Expanding incentive programs that reduce or waive planning and application fees at the municipal level and giving priority to purpose-built rental units during the approval process.
- Additional funding for a proposed $125 million provincial rebate program on development charges
For the purpose of the report the Toronto area is defined as the Census Metropolitan Area. That includes the City of Toronto as well as parts of Halton, Peel, York and Durham regions but leaves out a number of GTA municipalities, including Oshawa, Whitby and Burlington.
