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Concerns over navigating Toronto's housing crisis have been a constant for years now, but a number of unexpected factors popping up in recent months seem to be exacerbating the anxieties the housing crisis creates. Not only is inflation disrupting finances on the individual level, but economies are struggling across the country, interest rates are rising, and looking at the housing supply entering the market, the latest reports indicate that unit sizes are smaller than ever in an attempt to keep units affordable.
The term ‘purpose built rental’ is often brought up as a comprehensive solution to the problems the City is facing, but in order for those conversations to create positive change, the role of rental properties and the unique challenges in delivering them need to be more widely understood. What difference does rental housing really make in the housing market, and if it’s an important part of the supply solution, why isn’t there more of it already? We sat down with Andrew Joyner, Managing Director of Investments at Tricon Residential, to pose these questions and discuss his experience working with the most active developer of purpose built rentals in the city.
Looking generally at the barriers of rental development, “In Toronto specifically, we’re not incentivizing the behaviour that we want,” Joyner explained. “All three levels of government strongly believe we need more rental housing, but condo and rental are treated the exact same from a tax perspective, so I think that’s the first area for improvement if we want to catalyze more rental.”
By effect, rental development faces the same upfront costs as condo development, but without the capital afforded by advanced sales, effectively putting both in the same league despite the fact that the product being delivered is inherently different. “For us, we’re focused on long term livability and creating housing stability, so I would say that’s probably the biggest fundamental difference, the focus on end users,” Joyner said.
Condos on the other hand, are often designed to be sold to investors, a practice that allows developers to maximize profits by maximizing units through the creation of a higher volume of smaller units. Condo units that are rented by their owners contribute to what is referred to as the shadow market. Joyner, however, argued that, “the shadow units of condo inventory that ends up in the rental pool is not a substitute for the livability that purpose built rentals offer.”
Because of these “access to capital” challenges, Joyner explained that rental development is often left to only the biggest players, which has contributed directly to an over-saturation of the condo market that the City is seeing. Joyner went on to explain that if a healthy city could flourish with condos alone, Toronto would have no problems, but reality is that rentals are intrinsic to a balanced market. “To quote the Toronto Board of Trade,” he said, “Toronto’s economic growth and livability is harmed by the lack of supply of new rental homes.”
Rentals play a unique role in the urban ecosystem, offering more variable living situations that a financially stratified population requires. “Toronto has the highest population growth rate of any city in North America, we have strong job growth in the tech sector, and we have a very strong education system,” Joyner said. “We’re expecting millions of new people in the city, and a lot of those people either don’t have the money for a down payment or they want to have a more flexible lifestyle.”
Considering these realities, Joyner explained how, for Tricon, the decision to shift towards purpose built rental development in 2016 was a simple one. “When we looked at the supply and demand fundamentals, we saw that there was an incredible opportunity to be part of the solution by providing rental housing that responds to the needs of people like the young professionals, or the newcomers to Canada, or the essential workers and their families.”
With the success Tricon has seen in their completed rental projects up to this point, the company has begun to experiment with the model as a vehicle for affecting change not just for their residents, but for the wider community as well.
At Canary Landing, for example, one of Tricon's projects currently under construction in the West Don Lands, 30% of the units will offer affordable housing rates, and will be randomly integrated with the market rate units. “When you talk about the role of rental housing,” Joyner said, “it provides a really special opportunity to uplift people. By being a part of this thriving and complete community, there’s an element of helping people get ahead and contributing to the city.”
Expressing his response to the pressure to meet the relentless demands for housing in the city, “it’s exciting to have this demand,” Joyner said. “It’s because Toronto is a thriving city and a great place to live, but that’s why it is critically important that we have a rental sector with a supply to meet that demand.”
For Tricon, that project remains ongoing. “Ultimately we are trying to put a new lens on what 'rentership' means here in a very quickly growing global city,” Joyner said. “Inflation and higher interest rates are making all projects challenging, particularly rental, but our country has never needed it more. We’re super proud to be part of the solution and we look forward to doing more.”
UrbanToronto will continue to follow progress on Tricon's several developments, but in the meantime, you can learn more about them from our Database files, linked below. If you'd like, you can join in on the conversation in the associated Project Forum threads or leave a comment in the space provided on this page.
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