Tough luck, apartment hunters: The city’s insatiable demand for rental units has outstripped supply, putting landlords on top and sending rent prices skyrocketing. How did Toronto’s rental market get so nuts?
Scott MacDonald still thinks about the one that got away.
He wistfully remembers the heartbreaker, with its brand new laminate floors and kitchen appliances, its refurbished bathroom, and its huge deck. “This skylight is beautiful!” he called out as he toured the one-bedroom apartment at Bloor and Lansdowne, while the current tenant looked on curiously. “This is a great price for such a nice, newly renovated apartment,” he proclaimed. The place was above a bar, sure, but it was a quiet one. At $1,150 a month, it was more than a steal—it was a rental–market jackpot. In comparison, the half-dozen other places the 38-year-old writer and editor had failed to score now seemed like blessings in disguise. The landlord told MacDonald that the apartment was his. “I gave him all the forms, and thought it was a done deal,” he says.
The next day, though, MacDonald was informed that the current tenants—an Irish expat couple who were planning to relocate closer to the wife’s job—had changed their minds and were staying put. The landlord didn’t say why. He didn’t have to. MacDonald says that as he oohed and aahhed over the apartment, he noticed a gradual change developing in the young tenant’s expression. “They’d just moved to Toronto and didn’t know what they had,” MacDonald says.
“I broke all my furniture in a fit of impotent anger,” he now jokes of the loss. Or maybe he isn’t joking. And maybe he isn’t even responsible for the couple’s change of heart. In the end, such details are irrelevant in light of the cold, hard truth—the Toronto rental market has the power to drive any sane person to fits of rage and paranoia.
If it feels like scoring a decent pad is more competitive than ever and that rent prices are getting out of hand, that’s because it is and they are. In the last decade, Toronto’s population has increased by a million. Rent hikes over the long run roughly follow inflation (between one and two per cent annually), but from 2010 to 2012, the average cost of a one-bedroom apartment rose at twice that rate. Meanwhile, five years after the sky fell on the real estate sector—and the global economy along with it—the cost of purchasing a home continues to climb. The average house price in Toronto increased by $54,770—or 7.3 per cent—in the last year alone. Many renters who might have been tempted to buy have opted to stay where they are. And those who did invest in a house in order to rent all or part of it out had to charge more to cover their steep mortgage payments.
The condo market has graciously stepped in with a flood of new rental supply—the third quarter of 2013 saw over 10,000 condos put up for lease, an increase of 21 per cent from last year’s numbers—and yet the vacancy rate in the city is at its lowest in 10 years. With young professionals migrating downtown and a quarter of all international immigrants to Canada choosing Toronto as their destination, the housing supply continues to laugh hysterically in the face of the housing demand.
For a great illustration of how these economics play out on the ground, consider landlord Marko Kuljis, a 38-year-old graphic designer who bought an income property in West Queen West two years ago. He gutted the late-19th century workman’s rowhouse, with the help of the team from the HGTV reality show Income Property, to create a two-storey, three-bedroom apartment and a one-bedroom basement unit. “For the main space, my ideal tenant was a single, established woman with a good job. No pets and no smoking,” he says. “I wanted a professional.”
After listing it on ViewIt and Kijiji at $3,000 a month, he compiled a shortlist of 20 finalists. He showed the apartment to all of them over the course of a single day, and was able to award the lavishly renovated pad to a tenant who matched his ideal. If that’s not enough proof that this is a landlord’s market, Kuljis didn’t have to lower his bar, or widen his criteria for the basement unit, which he listed at a later date. For that one he scored—wait for it—a single, established, professional woman with a good job. A non-smoker, without pets.
Even apartment hunters represented by a real-estate agent aren’t protected from the fray. Carol Marquis, a realtor with Sage Real Estate, recounted the tale of a well-paid scientist, his wife, and their two children, who recently emigrated from Britain and were looking to rent for a year. As a favour, she skimmed through online channels in addition to her usual MLS search. When a Craigslist find led to a viewing of a two-bedroom apartment in Riverdale priced just under $2,000 a month, Marquis and the family arrived to discover nine other couples booked for the exact same time slot. She then got them another meeting for a property in the Beaches, she says, “Then the selling agent called to say, ‘Sorry, we’ve reconsidered and think four people in the apartment is too many.’” (This is, Marquis pointed out, a way for landlords to say they don’t want children without saying they don’t want children, since that’s against the law.)
The roots of this current rental crunch go at least as far back as 1967. That was the year that the condo was invented, courtesy of the province’s Condo Act. Prior to that, in order to rent out an apartment, an owner had to own the land on which the building sat. With the new act’s advent of what’s called “strata titling,” investors gained the ability to buy a slice of the sky (but not the land it was on) and then rent it out. This led to a skidding halt in the construction of what’s called purpose-built rental—buildings made solely for renters—because condos are more profitable for developers.
An immediate effect was the wide-scale loss of tenure security, a fancy way of saying that you can be booted out whenever your condo-unit’s landlord decides to move in or sell the place, factors that don’t play into purpose-built rentals. Additionally, the shared ownership drives up rental costs, the mathematics of which are best explained with a grocery shopping analogy—it’s like if you had to buy your milk and eggs from an individual person who had already bought them at a store, instead of going into the store yourself. With condos, there’s built-in profit margins for the developer and then for the individual investor after that.
The situation got even worse in 1997, when then-premier Mike Harris introduced Ontario’s Tenant Protection Act. Before this, rent on a dwelling could only be increased annually by an increment set by the province meant to mirror inflation. (This is still true of any property erected before the Act’s 1991 cutoff date.) Furthermore, the apartment itself was regulated—even if a tenant moved out, the rental fee could only be raised that same fixed percentage for the next tenant. The Harris government threw out both of these provisions.
David Hulchanski, a professor of Housing and Community Development at the University of Toronto’s Factor-Iwentash Faculty of Social Work, says those reforms have been detrimental. “Cities need modest rental units,” he says, noting that, as rents rise, lower-income workers necessary to the functioning of the city are forced out. “Who cleans our buildings at night? Who cleans the hotel rooms? Every city needs service-sector employees. Do they have to live way the hell out [in the suburbs], and commute two hours to come here [to work]? Firefighters and civil servants are well paid, but not well paid enough to buy a million-dollar house [in the city’s core].”
Another fallout from the rental-market squeeze is the millennial generation’s inability to launch from their family homes. Hulchanski offers the example of a neighbour who lives in a Bloor West detached home with her two grown sons and two daughters-in-law. “There’s a whole lot of that going on all over the place,” he says. Indeed, the statistic that I’m sure we’ve all heard some version of by now—over 40 per cent of Canadians aged 20-29 live with their parents—might very well become a more permanent arrangement.
Toronto may never return to the rent regulation of the pre-Harris era, but there are alternatives. Shelagh McCartney, a professor of Urban and Regional Planning at the Ryerson University Faculty of Community Services*, says some cities have succeeded in partial regulation. She cites Boston, for one, whose Inclusionary Development Policy requires new developments of more than 10 apartments to price 20 per cent of those units at rates affordable for people earning an average income or less. In Montreal, a similar bylaw gives the city leverage to negotiate the inclusion of 30 per cent of such lower-priced pads in developments with 200 units or more. (Since 2005, this bylaw has created the potential for 9,000 such units.)
According to McCartney, Toronto’s version of inclusionary zoning—the “Large Sites” policy on the city’s Official Plan—has failed miserably. Similar to Boston, Toronto’s policy asks that 20 per cent of new units be affordable, but instead of setting its threshold to developments with a minimum of 10 units, the policy is applied only to buildings sitting on five hectares of property or more, ruling out the majority of new builds.
Furthermore, the policy allows developers to opt out of creating cheaper units by choosing to establish other “community benefits”—such as public art, parks, and heritage conservation—which are less risky for them than creating mixed-income highrises. In fact, according to research by McCartney and Kara Robinson, as of 2010, the Large Sites policy had resulted in the creation of exactly zero rent-regulated units. “If you look at an area like Liberty Village, that’s a huge amount of housing that’s been created,” McCartney says. “And none of those units are affordable.”
While you might not like to think of yourself as needing a regulated apartment, the standard cut-off for such units is a salary anywhere from 10 to 80 per cent below the median income. (In 2011, the average Toronto household earned just under $70,000). “Students and young professionals that are just starting out fall within the affordable housing index,” McCartney says.
The longterm consequences of this ever more competitive rental market are dire. Squinting into the future, the failure of an adequate affordable housing policy means that Toronto will further divide into two distinct cities—the inner core for the haves and the outer rings for the have-nots. Elsewhere, this kind of disparity hasn’t turned out so well. In Brazil’s metropolises—São Paulo and Rio de Janeiro, for instance—rising public transit costs for those pushed to the outer margins laid the groundwork for ongoing, often violent protests. In my conversation with McCartney, whose research includes housing in the global south, I asked whether that could happen here. “I will not say that Toronto [will go that route],” she says, but notes that in those Brazilian cities, it was homogenization and a polarization along income lines that created the potential for unrest and protest.
McCartney suggests Toronto will suffer a lesser, but still problematic fate. As unaffordable rent causes the city to cast out its artists and newly-graduated professionals, it will become stagnant and dull. “People thinking creatively about culture and innovation tend to be young,” she says. “And those innovators are the lifeblood of a city. They’re what make it grow, spur forward. They’re what make a city a cool place that people want to live in. If everybody was boring, nobody would want to live here.”
City Hall has made efforts to address the rental-market problem. In October, chief planner Jennifer Keesmaat proposed a framework to create a harmonized citywide policy for dwelling room units, more commonly known as rooming or boarding houses. Ideal—and affordable—for lower and middle-income single people, such units are currently not legal in East York, North York, and Scarborough. Keesmaat has also initiated consultations to raise the maximum height for wood-frame construction (as opposed to the more expensive concrete and steel) from four storeys to six, something that’s already been done in British Columbia. The limit was set decades ago for fire-safety reasons, but Keesmaat says newer technology has made higher wood frames viable again, and that would bring price points down.
Councillor Adam Vaughan has managed to score a few wins for affordable housing in Ward 20 condos, even though the units were not mandated under the Large Sites policy. He cites Ten York—two sixtysomething storey buildings that will include a dozen affordable units managed by the Co-op Federation of Housing—as the kind of concession he’d like to see more of. As a counterpoint, he cites the Shangri-La Tower on University, just south of Queen, as a missed opportunity. Developers of that luxury hotel and its residences, a project that was negotiated before Vaughan came into office, agreed to a dozen infrastructure investments, including restoration of heritage facades and improvements in Grange Park. Something that wasn’t part of the deal: the inclusion of any housing that a hotel worker’s salary could cover. If the city had negotiated that, Vaughan says, “then you wouldn’t need transit, just a stairwell. And we’d be building not just tall buildings, but vertical neighbourhoods.”
Ultimately, affordable-housing advocates are handcuffed by provincial policies that lack teeth, as well as the disappearance of provincial and federal funding that gave developers incentives to build rental units. “In the past 12 years, in terms of new rental units, we’ve only had 6.8 per cent that are purpose-built,” Keesmaat says. (Toronto can hold onto its current stock via provisions in the City of Toronto Act that prohibit the demolition or conversion of any existing rental buildings, unless they are replaced at no cost to the city.)
“It would be great if we were like Montreal and could say 20 per cent [of construction] has to be affordable,” Vaughan says. “But the province hasn’t given that to us.” Overall, with the situation as it is, Vaughan says that creating lower-priced spaces for renters in Toronto is “a damn near impossibility.”
After the one-bedroom with the glorious skylight and the brand-spanking new everything was taken away from him, Scott MacDonald picked himself up and started again. After weeks of searching and still more rejected applications, he landed himself a three-year-old condo in the West Don Lands, near the waterfront. He’s paying $1,400 a month for a unit that’s smaller than the ill-fated one. “I find it impersonal in some ways,” he says. “But I do enjoy having a place that’s newer than most of the houses I’ve lived in.”
For renters like MacDonald, however, new condo stock is only a temporary solution. In time, even the smallest of these will become unaffordable for many and, as the city divides along income lines, Toronto will edge closer to what Hulchanski calls a “bipolar society.”
“Something has to give, but change only comes when people push for it,” he says. Money talks, but as Hulchanski wants to emphasize, renters vote. “When tenants organize and do their best to be heard, they can have an impact. The philosophy of the last 20 years has been, let the market be the market. That wasn’t the philosophy before—it was, ‘we’re all in this together, so what’s fair?’”
Whether or not this fast-expanding city’s tenants—along with desperate ones currently on the hunt—will ever come together to promote any significant change is unknown. But until such a thing occurs, as MacDonald learned all too well, it’s best to keep your cards close to your chest.
CORRECTION, NOV. 14, 2013: The original version of this article—as it appeared here and in the Nov. 14, 2013, print edition of The Grid—did not properly state Shelagh McCartney’s actual role at Ryerson University. The information has been updated.