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No vacancy: Average Greater Toronto rent tops $3,000 a month, says report

Yahoo Finance Canada logo Yahoo Finance Canada 2023-04-20 Michelle Zadikian
Average rents in the Greater Toronto area hit a record of $3002 per month in the first quarter, Urbanation says. (Photo by Creative Touch Imaging Ltd./NurPhoto via Getty Images) Average rents in the Greater Toronto area hit a record of $3002 per month in the first quarter, Urbanation says. (Photo by Creative Touch Imaging Ltd./NurPhoto via Getty Images)

The severe scarcity of rental units in Canada's most populous region is pushing rent prices to new heights.

The average monthly rent in purpose-built rental buildings completed since 2005 in the Greater Toronto Area (GTA) surged to a record high of $3,002 in the first quarter, according to a new report from market research firm Urbanation on Thursday. That represents a 13.8 per cent increase compared to the same time last year.

Meanwhile, condo rentals averaged $2,741 per month in Q1, with a similar 13.6 per cent jump year-over-year.

Urbanation president Shaun Hildebrand says purpose-built rentals can command a higher price because the units are typically larger and many newer buildings have higher-quality finishes, amenities and offer more legal protections against eviction compared to condos.

As the price for condo rentals rises, renters are opting for smaller units such as bachelors and one-bedrooms, the report says.

The average condo rent for a bachelor unit averaged $2,124, compared to a two-bedroom unit, which averaged $3,125 per month, according to Urbanation.

Demand for rentals has heated up amid high levels of immigration, falling homeownership affordability and a strong jobs market.

The vacancy rate of purpose-built buildings was 1.8 per cent in the first quarter, the fifth quarter in a row it was below the two per cent mark.

"The GTA rental market remained substantially undersupplied during the first quarter of 2023.

Even though supply is set to increase in the near term, it is expected to be short-lived and insufficient to offset demand. The fact that rental construction has dropped by over 60 per cent in the last year despite rents having risen to over $3,000 is indicative of the economic challenges developers are facing," Hildebrand said in the release.

Low-income workers feel the brunt of high rents

Surging rental prices can take an outsized toll on the region's lowest-income workers.

"Low-paid workers may move further away from their place of work to more affordable neighbourhoods, but that increases their commute time. Some eventually can't work the regular hours or any overtime. Those who choose to stay close to their place of work often can't afford anything more than a room, at best a hotplate, and a shared bathroom. They are more likely to feel less safe and sleep less well," said Armine Yalnizyan, an economist and Atkinson Fellow on the Future of Workers.

"Whether the toll is on their health or their ability to get to work or stay at work, high housing costs for low-paid workers show up on the bottom line of an organization."

Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.

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