Pandemic drives Toronto's apartment vacancy rate to record high, report says
Low immigration, high unemployment, decline in post-secondary students to blame, Urbanation says
A new report says Toronto's rental apartment vacancy rate hit a record high in the fourth quarter of last year.
Urbanation said Monday its survey of newer purpose-built rental apartment projects that have been completed in the city of Toronto since 2005 reported a vacancy rate of 5.7 per cent in the fourth quarter of last year, up from 1.1 per cent in the fourth quarter of 2019.
The consulting firm said the rate is a 50-year high when looking at Canada Mortgage and Housing Corp. survey data for Toronto back to 1971.
"I think these results speak to how drastically the [COVID-19] pandemic altered the rental market in Toronto," said Shaun Hildebrand, president of Urbanation.
"Demand was lost due to increased population inflows out the city. We had low immigration, high unemployment, a sharp reduction in the number of post-secondary students. And at the same time, last year, in 2020, we completed a record number of new condominiums."
Urbanation's report said the overall vacancy rate for the Greater Toronto Area was 4.6 per cent in the fourth quarter of 2020, up from 1.0 per cent a year earlier, as vacancy rates in the 905 region of the Greater Toronto Area rose to 2.0 per cent for the quarter compared with 0.8 per cent in the fourth quarter of 2019.
Younger workers among those suffering 'worst job losses'
Average rents for purpose-built units that became available for rent in Toronto during the quarter fell 10 per cent on a year-over-year basis. The annual decline in average rents in the 905 region was 2.2 per cent.
"This report looks at newer purpose-built rentals ... and also condo rentals, which are really the more expensive types," Hildebrand said.
"All the data shows that younger workers and more contract-type employment, suffered the worst job losses in 2020. They tend to have a higher representation in the rental market. And it makes sense that they would be gravitating away from higher price rentals."
Urbanation's report stands in contrast to the vacancy rates in Toronto heading into 2020, before the COVID-19 pandemic hit.
This time last year, CMHC reported that Toronto vacancy rates had been below two per cent since 2011, with "existing renters remaining in their rental properties, likely influenced by the fact that recently the average asking rents charged for vacant units are about 25 per cent higher compared to that of occupied units."
Vancouver and Montreal also had vacancy rates under two per cent before the pandemic began, according to CMHC.
"I think we're going to revert back to that scenario," said Hildebrand of the Toronto market.
"As vaccinations pick up, we're expecting that we'll eventually see higher levels of immigration. We'll see better population growth into the city of Toronto. The unemployment rate will come down. Workers will return to the office, students will return back to in-class learning."
Pandemic 'accelerated' outflow of population
Urbanation doesn't make similar reports for other regions across the country, but a separate report from Rentals.ca suggests that rent rates are down across Canada — though there are exceptions.
Rentals.ca said the average rent for all Canadian properties listed on its website was $1,750 per month in the fourth quarter, a decline of eight per cent from the same period in 2019. For the full year, Rentals.ca saw national rental rates fall 5.7 per cent to $1,794 per month.
The Rentals.ca report suggested that rental rates listed in Vancouver fell 6.7 per cent last year, while Montreal rates rose 5.2 per cent. But some cities, like Gatineau, Kitchener and Hamilton, saw rates increase between 15 per cent and 22 per cent in 2020, Rentals.ca said.
Hildebrand pointed to a recent data set from Statistics Canada that said Toronto, Montreal and Vancouver grew more slowly from July 1, 2019, to July 1, 2020, as people moved out to fast-growing suburbs like Oshawa, Ont., Farnham, Que., and New Westminster, B.C.
"Certainly the pandemic accelerated that outflow of population," said Hildebrand. "People were working from home as they sought more affordable rentals."