Policy Changes Vital to Address Toronto’s Rental Housing Deficit

The Greater Toronto Area (GTA) faces a significant housing crisis, as highlighted in a recent whitepaper by the Building Industry and Land Development Association (BILD). The report, titled The Pathway for Rental Housing Stock – Second Edition, developed in collaboration with Urbanation and Finnegan Marshall, emphasizes the urgent need for policy changes to stimulate the construction of purpose-built rental (PBR) housing.

Purpose-built rental units are specifically designed for the rental market, featuring larger apartments that are professionally managed and intended to remain rental properties. This sector is crucial for addressing the housing demand in the GTA, yet the report reveals a worrying deficit. Since 2016, the region has fallen short by 114,000 purpose-built rental units, with projections indicating a further shortfall of 121,000 units over the next decade. This totals a staggering 235,000 units needed to keep pace with population growth and housing needs.

Although the rental vacancy rate increased to 2.5 percent in 2024—its highest level in 15 years—this uptick is misleading. It results from a temporary surge in completed units, not a sustainable solution to the ongoing crisis. With a projected 50 percent decline in condominium starts in 2024 and insufficient purpose-built rental starts, the temporary supply will soon diminish, exacerbating the housing imbalance.

Some municipalities, such as Mississauga, have shown proactive leadership by waiving development charges for larger PBR projects and reducing property taxes. These measures have improved financial feasibility and serve as a model for targeted incentives that can enhance project viability. Conversely, Toronto, which experiences the most significant housing demand, presents a less favorable environment for PBR development. While some initiatives have been introduced, they lack the necessary scope and duration, rendering most projects economically unfeasible.

The report underscores the essential role of municipal policy in shaping housing outcomes. Developing new purpose-built rental housing is a capital-intensive endeavor. Rising construction costs, elevated interest rates, and complex municipal fees create an environment where many projects fail to attract the necessary investment. Without these investments, the cranes that once dominated the skyline will vanish, leading to fewer new homes and an intensifying affordability crisis.

Addressing this issue requires a coordinated effort among federal, provincial, and municipal governments. The report outlines specific recommendations for each level of government to bridge the viability gap and restore confidence in the rental market. Some steps, such as reforming development charges, are already in progress at the provincial level. However, other initiatives, like implementing a capital attraction strategy to draw investment into housing, remain to be established.

The full report and its recommendations can be accessed at bildgta.ca/industry-reports. Meeting the housing demand in the GTA necessitates alignment among government policies, the removal of barriers, and the creation of conducive conditions for purpose-built rental development. The evidence is compelling, and the path forward is clear. The pressing question is whether governments will act with the urgency required to address the needs of the growing region.

Dave Wilkes, President and CEO of BILD, emphasizes the importance of immediate action. BILD represents the home building, land development, and professional renovation industry in the GTA. For the latest industry news and new home data, visit www.bildgta.ca.