Why 2% could be a magic number for GTA housing supply

Giving investors and developers in rental housing units an element of certainty could have a big impact on supply in the Greater Toronto Area.

CIBC economist Benjamin Tal says that an annual rent increase of 2% for new projects, rather than the current inflation-linked increase allowed under rent control, could make the difference between a development going ahead or not.

“That simple move could go a long way to ease the current supply pressure facing the GTA housing market,” writes Tal in a new report.

He says that with low supply and rising rents, making that change to the rules would maintain renter protection but give a greater incentive to increase the supply of purpose-built rentals.

“A well-functioning rental market must be an integral part of any effort to improve affordability in the region. But that is not what we have right now,” he says.

Tal notes that developers are being challenged by higher mortgage rates and tighter lending rules, meaning a delay in some developments for the sales market.

He also says that the Places to Grow Act has had a significant impact on house prices in the GTA over the past two decades; adding that the only hope is for a quicker release of land by municipalities.


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