Annual Rental Rate in Toronto Could Increase By 7% in 2020: Report
It should come as no surprise that the rental rate in Canada’s largest city is going to continue to rise in 2020, according to a new report on rental market predictions.
The national report, which was prepared by rentals.ca, included predictions from experts across the country and predicts that rents will continue to rise in major metropolitan areas throughout Canada this year, with average rental rates expected to increase to 3% year-over-year on a national basis.
However, it’s the annual rate that could see the biggest growth, with an increase of 7% expected in Toronto, 5% in Montreal, 4% in Ottawa, and 3% in Vancouver, according to the rent report.
Shift in demand
The report revealed that 2019 was a strong year for developers and property managers as demand for rental units was strong across the country. One key contributor to this was a shift in lifestyle demands of renters, as more families turned to rent rather than owning.
“As more families continue to rent as opposed to buy, we see renters for larger homes are willing to sacrifice their ability to take transit or walk to get their groceries in favour of being located near a quality school,” says Vincent-Charles Hodder, CEO of Local Logic. “We expect the rental markets to perform very strongly in areas close to schools in 2020.”
Additionally, the report said affordability will continue to be a major issue in 2020, especially in Toronto and Vancouver where rent will continue to be the highest. In these major cities, vacancy rates are expected to hover around an “unhealthy” 1%.
Another big takeaway of the report is that all of Canada’s rental market is expected to be undersupplied in 2020.
Ben Myers, president of Bullpen Research & Consulting said: “the mortgage stress test, expanded rent control, changing Airbnb legislation, rapid population growth, and record rental housing construction continues to disrupt the balance between supply and demand nationally.”
“We expect the market to continue to be undersupplied overall in Canada in 2020,” said Myers.
Here in Toronto
In 2020, the rental market will remain tight and rents will continue to increase in Toronto. Moreover, the vacancy rate hovering around 1% won’t go anywhere unless more units enter the market, according to the report.
The report revealed that while more units are currently being built and are proposed for the city, Toronto’s population continues to grow at a rapid rate.
In a study from Ryerson University’s Centre for Urban Research and Land Development last year, Toronto grew by more than 77,000 residents by the end of July 2018, which was more than the next three cities combined — Phoenix, AZ, San Antonio, TX, and Fort Worth, TX.
And while there is currently a condo development “boom” in Toronto, it’s still far off of what’s needed to offset a rising population for Toronto, according to the report.
“It’s nowhere near what we need,” says Tony Irwin, president of the Federation of Rental-housing Providers of Ontario (FRPO). “We are in a housing crisis. We have to do things that are extraordinary. And, we need to do things with immediate impact.”
Irwin suggests there are a number of solutions that could be implemented that would have an “immediate impact” on Toronto’s housing market.
This includes streamlining the city’s development approval process, engaging more with communities including NIMBYs and tenants’ groups — sooner in the development process, developing ‘unicorn sites‘, which are properties with one or two towers that have room to add a third or a fourth, and bringing Toronto’s outdated zoning codes up to date, such as considering rental-only zoning as done in Vancouver, and more as-of-right zoning.
Irwin said that while there isn’t one solution to Toronto’s housing crisis, municipal governments need to start expediting approvals as land for developing is no longer as abundant and “by leveraging these sites and fast-tracking them, we could put a dent in the problem.”
Irwin also said he agrees with the city’s decision to regulate short-term rentals because of the low vacancy rate.
“It takes housing out of the market for long-term renters,” he says, “We need every unit we can get.” Some housing officials said that the short-term rental regulations could free up as many as 5,000 units for long-term renters.
But moving into the new year, Irwin said he’s hopeful the housing crisis in Toronto can be turned around.
“We’re starting to see the numbers go in the right direction,” adding, “we are seeing more applications, more shovels in the ground, and more units opening. But it’s still really slow.”
You can find the full national report here.