In spite of government initiatives specifically designed to get more purpose-built rental off the ground, rental housing in Toronto took a major hit in the first half of 2024, new data from Canada Mortgage and Housing Corporation shows.
CMHC reported on Thursday that total housing starts across the Toronto census metropolitan area (CMA) fell 13% in the first half of 2024 compared to the same period in 2023, and that the purpose-built rental apartment segment was largely to blame for the decline, with rental starts down 40% from 2023’s “multi-decade high.”
Looking specifically at the City of Toronto — where CMHC notes that “most” of the region’s rental housing is built — the report shows that starts dropped off by half in the first six months of the year compared to the first six months of 2023.
Apart from Ajax, there were no new rental projects that broke ground across the Toronto CMA suburban municipalities, according to CMHC.
CMHC
“When adjusted for population size, purpose-built rental apartment starts in the Toronto CMA were the lowest among Canada’s largest urban centres in the first half of 2024,” the crown corporation also said. “This, in part, reflects the difficulties getting rental developments started in the region.
CMHC cited “the high cost of financing” as one of the forces working against rental housing starts, noting that it took a bite out of potential profitability.
“This type of development already faced many long-term challenges in the region,” the government agency went on to say. “In addition, industry sources reported consecutive months of declining asking rents. This was likely another challenge to project viability in an environment where input costs, like those for materials and labour, remained high.”
CMHC
On the condo side of things, CMHC reports that starts across the Toronto CMA slipped — albeit by a far lesser degree (1%) in the first six months of 2024 compared to the first six months of 2023. However, in the City of Toronto, condo starts plunged 33% over that same period. The drop is attributed to “weak investor demand.”
“According to our Rental Market Survey data, this is the area of the CMA that has the highest investor ownership of condominiums,” CMHC said. “Potential investors were discouraged by the higher prices for new units in the urban core in a higher interest rate environment (the combination of high prices and rates has limited profitability). Decreased demand from investors suggests there may be fewer rental options in the future, as investor-owned condominiums are an important source of rental supply for the region.”
Conversely, in Pickering, Oakville, Mississauga and Vaughan, condo starts “more than doubled” over the same time period. “Developers continued to take advantage of lower land costs to offer more cost-effective ownership options, supporting the increase in activity in the suburban municipalities,” CMHC said.
More broadly, the agency cautions that “fewer housing starts” — in both condo and purpose-built rental — “along with a growing population and an existing supply shortage are troubling signs for housing affordability in Toronto, which has already long been strained.”
Thursday’s data comes from CMHC’s Fall 2024 Housing Supply Report, which also includes analysis on starts nationally, and in Montréal, Ottawa, Edmonton, Calgary, and Vancouver.
