Ryerson report says Toronto needs far more new rental apartments
The region also needs to wean itself from a growing reliance on private condos as rental units.
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The Toronto area needs 8,000 new rental units a year — more than four times the number it built last year — to restore the region to a healthy vacancy rate.
It also needs to wean itself from a growing reliance on the private condos that represent about a third of rentals in the city, says a report published Thursday by the Ryerson City Building Institute and Evergreen, an urban sustainability charity.
“Unless we’re going to make (home) ownership a lot more attainable, 8,000 is where we need to be at now and in the future,” said Graham Haines, research manager of the Ryerson institute.
At that rate it would take five to 10 years to restore the region to a vacancy rate of at least 3 per cent, says the report called, “Getting to 8,000: Building a healthier rental market for the Toronto Area.”
That level would permit tenants to find suitable, affordable housing. But the Toronto region’s vacancy rate has been below that for years. The most recent Canada Mortgage and Housing Corporation figure is 1.4 per cent.
Rents for available one-bedroom apartments increased 6.3 per cent between 2015 and 2016 and 8.8 per cent in the last year, says the report.
“One of the things that would be positive would be if we can get back towards rental buildings and rental supply versus condo supply because we can get back to the place where condos are an affordable entry way into home ownership,” said Haines.
“Right now we see condos are still going up by 20 per cent because they offer this investment opportunity for people who have spare real estate money sitting around,” he said.
While 76,000 condos have been built in the last decade, only 2,400 new purpose-built rental units have hit the market, according to the report.
Investors get a decent rate of return on rent and that puts the purchase price of condos further out of reach for home buyers, said Haines.
“You’re looking at something like $600,000 for a two-bedroom condo. That’s unaffordable for a young family that’s trying to get into the market,” he said.
The report recommends governments incentivize rental development by:
- Expanding the development charge rebate in the Ontario government’s fair housing policy that, in April, prescribed $125 million over five years.
- Providing municipal incentives to rental development.
- Developing a one-stop shop for federal and provincial development incentives.
- Changing HST rules so that rental developers can claim credits to offset the tax they pay on construction materials in the same way condo developers recoup their HST expense when they sell the units.
Haines downplayed a report last month by the Federation of Rental Housing Providers of Ontario that showed developers, who had been planning to create rentals, had switched 1,000 of those units to condos in light of the province’s decision to extend rent controls to newer buildings.
The odds are stacked against rentals and those buildings were probably on the edge, he said.
“The numbers are just there for condos. The finances make more sense and that’s ultimately the challenge with or without rent control,” said Haines.
The city is already looking at other policies recommended in the report, including a vacancy tax and restrictions on short-term rentals.
Haines says the city also needs to open up areas of the city to multi-residential homes where currently zoning makes it difficult to build anything other than single-family houses.
It wouldn’t make a huge difference in the number of rentals short-term but, he said, “With the vacancy rate as low as it is, providing any amount of rental supply will help improve the situation.”
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