Toronto tenants appear to be staying put in their current housing to avoid big rent increases, according to a new report from the Canada Mortgage and Housing Corporation (CMHC).
Turnover of rental units this past year reached a new low, the CMHC found in its fall 2024 report. Researchers said the dip is due in part to the premium an existing tenant would pay to rent a vacant unit at market rates.
If a tenant were to leave their existing housing, they would likely face a rental increase of about 40 per cent on average for a two-bedroom unit, according to the CMHC.
For the Greater Toronto Area, the study said the monthly rent for a purpose-built two-bedroom apartment unit was $1,963 on average, whereas as a similar condo rented for $2,918.
"For occupied units under rent control, landlords had limited ability to raise rents beyond the provincial guideline," the CMHC reported.
"Moreover, with a record increase in the supply of rental apartment condominiums, landlords in the purpose-built sector prioritized keeping existing tenants by taking a more cautious approach to rent increases," the CMHC added.
At the same time, it appears a significant number of people are struggling to pay the rent. The share of apartment rentals in arrears in Toronto was at its second highest recorded level, the CMHC said.
The overall situation has led to slower growth in what tenants pay in rent, primarily in the old City of Toronto boundaries, dropping from an 8.7 per cent annual increase to 2.4 per cent this past year for two-bedroom units.
In Toronto, the vacancy rate rose to 2.3 per cent, slightly above its 10-year historical average, as supply increased.
"We saw average annual rent reductions of around 1 per cent in and around the City of Toronto's downtown core, where most new rental condominium apartments were built," the study's authors wrote.
When existing rental units did become vacant, Toronto — along with Vancouver and Halifax — saw some of the highest rent increases among major cities.
'Limited mobility'
"In these rent-controlled markets, persistently low tenant turnover meant that when units became available, landlords had room to hike rents to match current market levels," the CMHC reported.
"Higher rents made it harder for new renters to enter the market and further limited mobility for existing tenants."
Population growth was also a significant driver of rental demand, the CMHC said. As of July 1, 2024, international migration reached a record high of nearly 1.2 million people over the previous 12 months, according to the report.
However, the introduction of a cap on international students led to a shift as fewer foreign students were admitted this school year, the study said.
"Our local market intelligence suggested that in Ontario and British Columbia, the two provinces most impacted by these measures, landlords in areas near post-secondary institutions found it harder to fill vacant units this fall," the CMHC said.
Even with a recent decline in entry-level home prices and lower mortgage rates, renting remained the more affordable option, the CMHC concluded.
The CMHC said of all the provinces, the rate at which tenants were behind on their rent payments was highest in Ontario.
Rental operators also reported that a backlog at the Landlord and Tenant Board has kept many units in arrears.
