Buying and selling real estate has garnered a lot of media attention, especially with rising home prices both before and during the COVID-19 pandemic. The rental market – and especially so in the Greater Toronto Area (GTA) – has also seen its share of sweeping changes brought on or exacerbated by pandemic-induced shifts in the economy. The GTA  experienced the most stringent lockdowns during the pandemic as well as some of the most dramatic upswings in home prices which trickle down into the rental market.

On a recent episode of the Ready to Real Estate podcast, show host and TRREB Chief Market Analyst Jason Mercer met with Canada Mortgage and Housing Corporation (CMHC) Senior Specialist Dana Senagama to discuss some of the findings from the CMHC’s 2022 Rental Market Report for the GTA. Read on for three key trends that emerged.

The pandemic disproportionately affected traditional renters, increasing vacancy rates

While everyone in Ontario went into lockdown in mid-March 2020 – save for healthcare, grocery, and other essential workers – not everyone experienced that lockdown the same way. Employees who could continue their work at home did so, while others in the entertainment, food, and hospitality industries were temporarily laid off. This service-based sector of the economy also makes up the people who are more likely to rent; they tend to be younger and/or earn a lower income. Because they were laid off and unable to fulfill their rental obligations, they had to move out, increasing vacancy rates as a result.

In fact, vacancy rates were at an all-time high in Toronto and the GTA as measured by the report: seven per cent in Toronto and three per cent in the surrounding area. For reference, they were stable at two per cent in the ten years leading up to the pandemic.

Higher-income households became luxury renters

During the podcast, Dana explains that much like the higher end of the housing market, the higher end of the rental market was least affected by the changes brought on by the pandemic. Units catering to households in the fourth and fifth earning quintile (measured as rent equalling 30 per cent of $80,000 or more a year) were largely occupied. 

There were more options for the higher-income renter, too, given the temporary pause on short-term rentals, such as Airbnbs. Many of these short-term rentals moved into the long-term rental pool, increasing the supply for more high-end rentals in the form of investor-held units. 

Purpose-built rental construction lags behind investor-held condo units

Jason notes that with rising rental prices, it might encourage developers to divert to purpose-built rental construction; however, this hasn’t been seen in any significant way. Dana agrees that purpose-built rental development is trending higher than it had been in the last 10 years, but the number of units is not keeping pace with the number of condo units coming online. She says for every purpose-built rental unit, five condo units are added to the market; it’s likelythat the condo market is so strong for both resale and rental that it’s that much more enticing to a developer to build.

For even more insight into where the rental market is heading into 2022, and what might inspire a decline in the vacancy rate, make sure to catch the full episode.