Rental Housing Crisis in Toronto

The vacancy rate for rental apartments in Toronto is about 0.5%, average monthly rents are increasing at an accelerating pace, and the supply of new rental units is far behind the number of new renter households being created each year. Clearly the Toronto rental housing market is in a crisis.

The causes of the problem are varied:

  • The influx of immigrants to Toronto has mushroomed to about 100,000 over the past year, including refugees, international students, and workers chasing after jobs in high-tech companies;
  • Lots of would-be home-buyers who have been forced out of the market by rising prices as well as the new, stricter mortgage rules; and
  • Tenant-friendly rental legislation, including rent controls, as well as government zoning restrictions and development costs, have historically discouraged the creation of enough rental units to meet the demand.

Because the demand so far exceeds the demand, the biggest losers are would-be renters with lower income, marginal credit or any other characteristics deemed ‘undesirable’. Landlords can afford to be very picky about who they rent to.

The provincial government made a step in the right direction this month by removing rent controls on new, previously unoccupied rental units. This will encourage developers to invest in more ‘purpose-built’ rental buildings, and will also encourage more condos and apartments in houses to be made available for rent. The city’s recent green light for laneway suites should also help to create more rental units as will the promises to offer city land, cash incentives and reduced taxes and development charges to developers. None of this will make large numbers of rental units available any time soon, however.

In the shorter term, the city could consider relaxing zoning restrictions on small multi-unit buildings and providing incentives and support for homeowners who would consider consider converting part of their house (usually the basement) to a rental apartment to help pay the mortgage. Such units could be created much more quickly and at much lower cost/unit than the units in large rental buildings, however, many homeowners are discouraged from doing so by the byzantine process required to get a second suite approved by the city, as well as fears about taking on a ‘tenant from hell’ they can’t get rid of.

Conceptually, the cost of creating a basement apartment, say, could be shared by the city, and could be repaid over time through sharing of the apartment rental income. The city could also provide property management support to protect the owner from bad tenants. Potentially this could create a huge win/win: the homeowner gets rental income that he would otherwise be unable to obtain, and the city gets new rental housing stock, properly constructed to meet fire & electrical codes, at a fraction of the per-unit cost (and lead time) of the subsidies that will be required to encourage more dedicated rental buildings.

These sorts of outside-the-box ideas seem in short supply, however.