Rental vacancy rate is the number of properties that are available to rent, or the percentage of rental homes available in a community. While this varies across cities and communities, and different rates are considered healthy in different neighborhoods, it is perhaps no secret that right now, Toronto is at an all time low level for rental vacancy. And in fact, it may be at an unhealthily low level.
Toronto’s Vacancy Rates
The current vacancy rate for the GTA is sitting at 1.1 percent, at a 16-year low in a market where housing prices have increased 33% between 2016 and 2017. The vacancy rate is determined by several factors including population growth and population density, the current housing market, and government regulations. In part, these current rates are being impacted by the new mortgage laws enacted across the city on January 1st. These new laws are making it more difficult for individuals to take the first leap from renting to owning a home, with the need for a larger down payment, or higher income support. And these same laws are contributing to unhealthy vacancy rate levels limiting the affordability of housing.
New mortgage stress test implications make it more difficult to vacate rental housing and own a property, meaning that fewer people are leaving their rental, and are occupying rental properties for increasing periods of time. This results in an increase in demand for rentals, coupled with a lack of supply: there aren’t enough rentals to support the number of people that want them. In response, prices go up for rentals, with rent increases of nearly 10 percent reported in one-bedroom condominiums in the second quarter of 2017.
What Does This Mean?
Outwardly, this translates to housing, which for many, is unaffordable, not to mention the difficulty in finding housing at all due to the high rate of occupancy. Many people report that apartments are leased within hours of being advertised and often go to bidding wars. While the end isn’t in sight, new tenancy laws prohibiting landlords from evicting tenants from housing for their own personal use will help, and experts predict that housing prices will drop in the first part of the new year in response to the new mortgage laws. Overall however, at least for now, experts also warn that Toronto’s vacancy rates are at an unhealthy level and that individuals can expect repercussions accordingly: difficulty finding housing, and difficulty finding affordable housing. If you have a rental, it may be best to hold on to it, and sit tight!