Did you know about a third of Canadians rent their home rather than own? Renter households may be less numerous than owner households, but they have been growing at more than twice the pace, according to Statistics Canada. As rapid population growth and housing supply and affordability challenges lead more families to choose renting, causing rents to rise, policy makers must look for ways to build more homes specifically for long-term rental accommodation, also known as purpose-built rentals.
Purpose-built rentals represent a vital segment of the GTA and Ontario’s housing stock. Unlike other forms of rental housing, such as condominiums rented out by individual owners, they are a dedicated form of rental, providing security of tenure. Purpose-built rental buildings also tend to offer a greater share of two- and three-bedroom units per building, better accommodating families.
In the GTA, purpose-built rental units represent approximately a seventh of all the housing stock available, rental and owned, but slightly less than half of the number of units available for rent. Unfortunately, the region’s stock of purpose-built rental housing is aging and new supply is coming to market at much lower levels than other forms of housing.
Almost 90% of the GTA’s purpose-built rentals were built more than 40 years ago. The golden age of building purpose-built rentals was between 1960 and 1979, when 223,954 units were built. By comparison, only about 23,590 purpose-built rental units were built between 2000 and 2022. The rate of purpose-built rental construction increased after 2018, with the removal of rent controls, but that surge appears to be abating.
With demand for rental housing expected to grow in the next decade, why are we not building more purpose-built rentals? The answer lies in simple economics. Building purpose-built rentals, particularly in major cities in the GTA, is more expensive for developers than building other forms of housing because they have to invest more capital upfront and have to wait longer for the project to become profitable. These challenges are exacerbated by the way in which taxes and charges are applied to purpose-built rentals.
This week, the Building Industry and Land Development Association, along with our colleagues at the Federation of Rental-Housing Providers of Ontario (FRPO), released a report on the current state of the market for purpose-built rental developments in the GTA. It is available at https://www.bildgta.ca/news-resources/industry-reports/. We hope that policy makers will consider its recommendations on how to enable purpose-built rental development to help meet the present and future housing needs of GTA residents.