Renting in the Greater Toronto Area is becoming increasingly perilous for many tenants.
The average cost of rents in Toronto hit $2,898 in August, while throughout the region prices have generally skyrocketed by over 30 per cent in the last two years alone.
It’s not a mystery why. Demand is far outpacing supply, particularly when it comes to purpose-built rentals. That is, housing built specifically for stable, long-term rental accommodation that is usually professionally managed.
The shortage has been decades in the making. And now a “perfect storm” of factors has made the impact on the rental market and rent prices especially acute, says Shaun Hildebrand, president of real estate consulting and data firm Urbanation.
“There’s an intense level of competition among renters. Demand is growing on a number of fronts and there’s extremely limited amounts of supply,” he said.
In 2018, Ontario’s Progressive Conservative government took a controversial step to try to address a dearth of purpose-built rentals. Fresh off his election win, Premier Doug Ford rolled back rent controls on all units built or occupied after Nov. 15 that year, saying the move would provide “market-based incentives for supply growth.”
The government wagered that scrapping rent controls on newer units would encourage developers to build more purpose-built rentals, since the absence of rent controls, at least in theory, makes those projects more financially attractive.
Given the current circumstances for renters in the GTA, it may seem obvious the government’s rent control revisions did little to create more supply. But the reality is more complicated.
A February report by industry groups and Urbanation found the changes did initially generate more developer interest in purpose-built rental projects. Between late 2018 and the end of 2022, the number of proposed rental units throughout the GTA nearly tripled from about 40,000 to more than 112,000, though less than a third were approved.
In the City of Toronto specifically, applications for purpose-built rentals more than doubled in 2019 from the previous year, according to a staff report.
Meanwhile, GTA rental starts (the number of units included in projects with shovels in the ground) hit a three-decade high of 5,958 in 2020, according to the industry report. That’s about triple the average pace of rental construction starts of the preceding two decades, it said.
But then the momentum stalled, and progress has remained largely stagnant since.
What happened to Toronto when rent control went away?
In 2018 Ontario rolled back some rent controls to incentivize developers to build more purpose-built rental units. But as CBC Toronto’s Shannon Martin found out, that’s not exactly what happened.
The COVID pandemic hit and along with it supply chain constraints. That coincided with an ongoing skilled labour shortage. Then came progressively higher interest rates. Since 2020, average construction costs have increased four times faster than rents, according to Urbanation.
Many proposed rental projects became commercially unfeasible very quickly, Hildebrand said.
Unfortunately for renters, this all corresponded with intensifying demand-side pressures.
High interest rates and astronomical house prices have kept would-be homebuyers in the rental market. Those who do live in rent-controlled units are reluctant to leave, fearing huge increases in rent if they move into a new place. Landlords in Ontario can charge new tenants whatever the market may bear for a previously vacated unit, a practice known as vacancy decontrol.
The GTA continues to be a primary destination for new Canadians and has also seen a post-pandemic influx of international students, two demographics that typically rent.
Huge demand over next decade
A significant majority of purpose-built rentals in the GTA went up more than 40 years ago, according to the Canada Mortgage and Housing Corporation (CMHC). Construction slowed significantly in the intervening years, with investor-owned condos becoming the dominant source of rental supply in the region by far.
“We’re now paying the price of not building,” said Steve Pomeroy, a professor at McMaster University’s Canadian Housing Evidence Collaborative, about the pressures on renters.
Understanding Toronto’s rental market pain points
Toronto’s rental market has several pain points. CBC Toronto’s Shannon Martin speaks to several housing experts to better understand how Canada’s largest city has been pushed into a rental crisis.
Urbanation projects that demand for purpose-built rentals in the GTA will grow by about 300,000 units in the next decade. Even under a “pretty optimistic scenario,” the firm forecasts a deficit of more than 170,000 units over that same time period.
Notably, though, those projections were made before the federal government announced it is waiving the GST on long-term rental construction — a policy to spur development that’s long been favoured by housing experts and industry insiders.
Some GTA developers have already indicated the move could see more proposed rental projects, and stalled ones, move forward. But the existing supply deficit in the region is so substantial that some experts say a tax cut alone is unlikely to be a panacea.
One problem is timescale. Short and long-term demand are expected to remain high, while rental projects, particularly those with large and complex footprints, take years to materialize.
“It takes four or five years, minimum, to create a unit,” Pomeroy says. “An international student can get on a plane today and arrive by tonight or tomorrow. We can’t produce a rental unit that fast.”
A polarizing policy
Rent control has proven a politically divisive issue. The opposition New Democrats and Ontario Liberals were critical of Ford’s changes to the province’s rent control policy in 2018, and both parties have said they would reintroduce protections for all rental units if in government.
Critics of rent control argue that it deters both new construction and upgrades to existing rental units by landlords. Those who support it say the benefits to tenants, particularly a sense of financial stability, outweigh any potential negatives.
According to Pomeroy, the evidence from past decades presents a mixed picture. Rollbacks to rent controls in both Ontario and B.C. in the 1980s and 1990s, for example, did little to fuel construction of rental projects, he says.
That said, the lack of purpose-built rental housing in the GTA has quickly reached a critical point, with demand only forecasted to increase in coming years. Pomeroy says an ideal approach would limit the volatility of rent increases for non-rent controlled units, while ensuring new projects still make financial sense for developers.
“We have an under-supply of purpose-built rentals. And now we have to play catch up,” he said.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
