Average apartment rent in Toronto exceeded $3,000 in March

Last month, the average monthly apartment rent in Toronto reached a record high of $3,122, which is another sign of a significant housing affordability problem in Canada’s biggest city.

According to Urbanation Inc., it’s 13% higher than in March 2022 and the first time apartments specifically built for rental exceeded $3,000. For this report, the research firm studied buildings completed after 2005.

The apartment rent is higher than the one for condo units, which are usually individually owned and account for the largest share of the rental market in Toronto.

“The difference between what is necessary to have in order to rent and what people actually have is huge,” – said Garima Talwar Kapoor from the anti-poverty foundation Maytree.

Toronto rent has been growing sharply as people keep moving here after pandemic-caused restrictions were lifted. In addition to it, many potential homebuyers have been staying in their rentals when the borrowing costs skyrocketed after the central bank’s interest rate increases aimed at restraining inflation.  All these factors have cut the number of places available to rent and led the apartment vacancy rate below 2% – almost the same number we’ve seen before the pandemic.

In the region closest to the city, the apartment rent was also up by 13% to $2,653 a month during the first quarter.

However, although the average monthly rent has grown sharply, developers believe it’s not economical for them to build rental-only apartments, Urbanation says. Apartment-building developers face huge upfront construction costs, as well as condo builders. Nevertheless, it takes much longer for them to get their money back, as the building fills up with tenants who pay the rent. Meanwhile, condo developers recover their costs right after the building is completed and individual owners buy their units.

According to Urbanation president Shaun Hildebrand, it’s an alarming sign that rents in the new buildings have exceeded $3,000 but developers still can’t make money from it. In his opinion, it’s easier for them to build condos.

Policymakers and the housing market have encouraged rental-only apartment buildings as a way to solve the housing affordability issue. Nevertheless, many of the new rental-only apartment buildings are asking higher rents than condos.

In another study, Urbanation reviewed units built after 2018 and found that the average monthly rent for an apartment reached $3,120 compared with $2,671 for a condo. The firm says rental-only apartments usually offer more space and better amenities.