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Supply-Side Dynamics Providing Some
Relief to Renters Searching for Space
Market well below equilibrium despite supply surge. Toronto’s population grew by 3.4 per cent in 2023 and continued its outsized gains last year amid ongoing immigration. While population growth is set to cool notably amid changes to immigration policies, past gains and pent-up demand will put pressure on the existing rental stock. Starting in the late 1970s, builders switched away from purpose-built rentals due to rent control policies and for-owned condominiums offering higher profitability. Decades of underbuilding has now led to an imbalance in Toronto’s multifamily sector. Nevertheless, the combination of government incentives and improving fundamentals has caused a significant uptick in rental development, with the under-construction pipeline hitting its highest level on record last year. For-owned condos – which act as a secondary source of rental supply – are also seeing elevated deliveries. While these factors will provide some relief to renters in the short term, the market will hold below equilibrium. Furthermore, over the long term, market tightness could intensify amid the recent pullback in construction starts seen over the course of last year due to higher costs, as well as rising vacancy and stabilizing rents in new builds.