Sorry, fellow renters, but it seems like there’s no reprieve in sight when it comes to your monthly rent. Au contraire, looks like rental prices are really just due to rise, yet again, with Toronto holding steady as one of the most desirable cities to rent in, and with a very short supply of rentals compared to the demand.
In late 2015, the CMHC released numbers showing that Toronto is the most expensive city in Canada for renting a condo at an average of $1,754 and the third most expensive for renting an apartment, at $1,274.
So why won’t things improve? Why do we have to continue to bear rent increases even as our incomes stay pretty much the same?
It’s a long story, but here’s the Coles Notes version. The costs of land, materials and labour are all expensive, so building condos and apartments costs a ton. Developers want to make their money back, plus a profit, so whether they sell or rent the units they build, the price reflects what they paid for construction, plus extra. (Honestly, everyone gets their “extra” along the way and we at the end of the line pay for it.)
In this TD Economics report from January 2015, a University of Toronto study is quoted as saying that condo developers would need to charge, on average $2,250 a month for built-to-rent condos, to make a 10-15% return.
Here’s more from that report:
“All the new rental supply added over the last decade has been in condos geared to middle-income households with an average monthly rent of $1,700.
“While average rents in the bottom 20-40% of the rental market have been growing at a moderate pace, these cost increases have still managed to narrowly outstrip gains in income. Average rents on properties in the bottom 40% of the rental market amounts to about 47% of average income for this group of earners. “
Also, with Toronto short on actual land, especially near the core, finding space to build more rentals gets tough, and the land and buildings that are suited to developing apartments and condos get more expensive.
So the basic answer is that unless some major reversal happens and everyone along the way decides they don’t need to get paid as much, rents in Toronto won’t decrease anytime in the near future.
Kind of a depressing article. But that’s reality.
Want to see how rents in Toronto compare with the GTA and other nearby cities in Southern Ontario? Check out our infographic and article on the cost of renting in Toronto.
Tell us, how much of your take-home pay do you spend on rent these days? (The average is apparently 50% – much higher than what’s deemed healthy!)