The average monthly rent for a Toronto apartment hit a record high of $3,122 in March, a dire sign of the worsening affordable housing problem in the country’s largest city.
That is up 13 per cent from a year ago and marks the first time apartments that are specifically built for rental topped $3,000 a month, according to a study released Thursday by condo research firm Urbanation Inc., which surveyed buildings constructed after 2005.
The monthly rent for apartments is higher than for condo units, which are typically individually owned and make up the majority of the rental stock in the city
“The discrepancy between what it is to afford rent versus what it is that people are able to afford is huge,” said Garima Talwar Kapoor, director of policy and research for anti-poverty foundation Maytree.
Rent has been rapidly rising in the Toronto region as people continue to move to the city after pandemic-related restrictions eased. As well, many prospective homebuyers have been staying in their rentals after borrowing costs spiked when the Bank of Canada began raising interest rates to slow inflation. That has reduced the number of places available to rent and pushed the apartment vacancy rate below 2 per cent. That is similar to prepandemic days when the city was thriving.
In the region immediately surrounding the city, the cost of renting an apartment has also climbed 13 per cent to reach $2,653 a month in the first quarter.
And even though the average monthly rent has soared, developers say it is not economical for them to build rental-only apartments, according to Urbanation. Apartment-building developers shoulder the heavy upfront cost of construction just like condo builders. But they recoup their costs over a much longer period of time, as the building fills up and renters pay the rent. Condo developers recover their costs immediately after the building is completed and individual owners pay for their unit.
The cost of construction has been quickly rising because of higher labour, financing and material expenses such as steel and concrete. Residential construction building costs were up by 25 per cent from 2021 to 2022 in Toronto, according to Statistics Canada. Across 11 major cities, including Vancouver, Calgary, Winnipeg and Halifax, residential construction costs were up by 19 per cent over the same period.
Urbanation president Shaun Hildebrand said it was alarming that rents in new builds have surpassed $3,000 and developers still can’t make the numbers work. He said it is “much easier for them to build condos.”
Policy makers and the real estate industry have pushed rental-only apartment buildings as a solution to help provide the city with more affordable housing. However, many of the newly constructed rental-only apartment buildings are commanding rents higher than condos.
In a separate survey, Urbanation looked at buildings built after 2018 and found that the average monthly rent was $3,120 for an apartment compared with $2,671 for a condo. Urbanation said rental-only apartments typically have more space and better amenities and they are professionally managed.