The Demand Supply Paradox of Rentals in Toronto Real Estate

Despite building more high-rise structures than any other place in North America, the Toronto real estate is still far behind from solving its demand supply paradox of rental units. Recent reports from real estate and urban planning organizations have highlighted various reasons attributing to this conundrum of the Toronto real estate market.

For instance, one report suggests that the just within a decade the Toronto real estate could possibly see a lack of 200,000 rental units. This is because Ontario has seen a much faster growth rate in its population figure during the recent years. However, its expansion rate to deliver more rental apartments to accommodate this population has been almost half of what it was expected to be for the period between 2017 and 2031.

Other similar researches have also drawn not much different conclusions. But the fact that is mostly not talked about here is that the increase in population and rental units should have remained paralleled.

One major reason for the increase in Toronto’s population is due to the massive number of immigrants that moved into this city. Some nearly 600,000 people chose Toronto as their home during the last 15 years. Subsequently, the increase in birth rate due to this inflow added another 175000 new residents to the city’s population. However, much of the Toronto rental market situation remained under control during this time thanks to the outflow of nearly 380,000 people.

While this disparity in demand supply of residential units might have made Toronto real a hot rental market, it has highly affected middle-income earners. Between the years 1971 to 1996, the government focused on developing social housing schemes to support affordable housing. Many new rental units were added to the Toronto real estate making it suitable for more and more people but due to the budget cuts by both the federal and provincial administrations in the following after this period, not only did rental prices increase but also the number of new rentals units being built declined.

One opinion is that even if the government still has no plans to subsidize housing for middle-income earners, they can still allocate more land for the construction of more units which may eventually result in a decline in rental prices.

However, it is also a fact that as the cycle of being living as a single person evolves into becoming a family, more space in definitely needed to adjust this small group of people. Thus housing demand diverts for a bigger residential unit like a single or semi-detached house, town house or garden apartment. But the problem here is that in a built-out city like Toronto, allocating land for low-rise construction is almost impossible. Two things result due to this shortage of land. First, demand for existing low-rise buildings and their rentals go up and second, only high rise buildings are preferred to be built on the available land.

A widely debated solution to this issue proposes on converting single-family owned large houses into multi-unit buildings to make room for more families. Cities like Toronto where as much as two-thirds of the housing land is zoned by single-family houses, is considering the pros and cons of implementing such solutions.

During the recent Covid-19 crisis, the issue related to shortage of affordable housing emerged when it became almost impossible for low-income groups to spend much of their income on rentals. This led to evictions and creation of tent-cities. Even though the Toronto city administration as well as the government has announced plans to build more non-shelter housing units, the demand and supply of rental units in Toronto real estate can only be met by prioritizing and using fast track initiatives to build more units in less time.