RBC’s lauded economics division recently released a report called Big City Rental Blue: A look at Canada’s Rental Housing Deficit which has grabbed a decent chunk of media attention. The report is an interesting read.
It shows that Toronto needs over 9,000 rental units as of last year to achieve a healthy vacancy rate of 3% (this gives prospective renters meagre, albeit decent options and flexibility in their rental options). The current rental vacancy rate for apartments is 1.1%, only Vancouver has fewer free rental units. For condos the vacancy is 0.7%, a stunning figure that probably ranks as one of the lowest vacancies in the world. The Vancouver condo vacancy rate is 0.3%.. These are tremendous figures. This is the supply situation, and it’s dire.
And the demand picture? You guessed it, even more dire. RBC’s report estimates that there will be a need for an additional 22,000 rental units in Toronto from 2019 to 2023. To give the market a meagre degree of rental unit balance, over 26,000 rental units were needed in Toronto this year, but only 4,300 rental apartment completions were noted. Even if all condo completions are included, the figure still falls thousands of units short. This is why vacancy rates are so low. While 53,600 condo units are under construction as of July 2019, only 33% of these units go into the rental market and many of these will take years to complete. Rental apartment construction has stalled in Toronto for decades as developers find it is far more profitable to put up a 30 storey condo, rapidly sell, and take the proceeds to finish up another quick project.
RBC called for a comprehensive and targeted policy to outline clear goals and to provide strong incentives to build. Apartment rents in Toronto are increasing at twice the rate of inflation (4.5%), and these price increases will likely accelerate as the demand and supply situation won’t be shifting dramatically anytime soon. As we outlined in previous publications, the rental situation is so dire in Mississauga and many surrounding municipalities that prospective renters are offering landlords higher rents than are publicly outlines to be competitive with their counterparts. Congratulations to all Torontonians are are satisfied with their rentals and the rents they are paying! Good luck for those of you on the rental hunt!