The federal government says it is financing a new rental housing project in Etobicoke with the aim of bolstering the city’s dwindling rental stock.

The 16-storey project, announced Thursday, broke ground in January and is set to be completed by April 2021.

Built on a site where there are already four other rental towers, the building will be called The Terraces of Princess Gardens. The 259-unit building will include 204 units where the rent will be at or below 30 per cent of median income in the area.

At least 62 of those units will be held at affordable rent levels for 10 years, according to a spokesperson for the project.

The federal government is financing the project in the form of a low-interest loan of $89 million to the developer, Princess Management, which will own the building. The financing is being arranged through the Canada Mortgage and Housing Corporation’s Rental Construction Financing initiative, a program that aims to incentivize the construction of rental housing through low-cost loans.  

At least 10 per cent of the units will also be accessible and the building is touted as being energy efficient.

The move comes as Toronto grapples with a shortage of affordable rental housing. The vacancy rate for rental units in central Etobicoke is just 0.6 per cent.

“Through the National Housing Strategy, more middle-class Canadians - and those working hard to join it - will find safe, accessible and affordable homes in communities where their families can thrive, children learn and grow, and have the stability and opportunities they need to succeed,” Minister of Children, Families and Social Development Jean-Yves Duclos said in a news release.

Mayor John Tory lauded the project Thursday as the sort of development that that the city needs in order to continue being competitive.

“The number of people employed in the City of Toronto right now is the highest it’s ever been,” Tory said. “But that success has created a shortage of rental housing, especially affordable rental housing, and our continued success as a magnet for jobs and for investment and for smart people to come to the city from around the world will depend on our ability to get more rental housing built as soon as we can and to get more affordable rental housing built in particular.”

The announcement came a day after city crews cleared away tent encampments from under the Gardiner Expressway and the same day that ACORN Canada held a rally outside the office of a Scarborough MPP to demand stronger protections for renters.