Purpose-built apartment construction hit the highest levels since the 1970s in the last quarter of 2019, suggesting there is some relief in sight for Toronto’s vacancy-challenged tenants. But it won’t materialize until later in the decade, says the president of Urbanation, a market research company that tracks development in the Toronto region.

Its fourth quarter report shows there were 12,367 apartments being built at the end of last year. To put it in perspective, there were only 18,602 units built in the 1980s and 1990s — the period after Ontario introduced rent controls, Shaun Hildebrand said.

Also encouraging was a 43 per cent year-over-year increase in the number of development applications for purpose-built rentals in 2019. Those applications could add another 17,082 units to the housing supply, the report said.

That means a total of 69,564 apartments were under construction or proposed for development by the end of 2019. But it will take time for those to become occupied, Hildebrand said.

“When you look at 70,000 units — adding in the construction and those that are still in the planning stage — it’s at least a seven-year timeline for all of them to make their way into the market,” he said. “Most of the planned supply is still in the very early stages. In the meantime the market has very little chance of any meaningful relief.”

Hildebrand said the GTA could be building at a pace of nearly 10,000 units a year, compared to the current level of 2,000 to 3,000 apartments.

He credited the provincial government’s November 2018 elimination of rent controls on new units as an “important factor” driving the growth in rental development. But there are other contributors.

“It’s demand, it’s how low vacancy rates have been consistently year to year and, just as important, how high rents have been, making the economics feasible for projects to be built,” he said.

Canada Mortgage and Housing Corp. reported that the GTA’s vacancy rate rose slightly last year to 1.5 per cent, up from 1.2 per cent in 2018. In the City of Toronto, which has by far the most rentals, vacancies increased to 1.5 per cent from 1.1 per cent. A healthy vacancy rate is considered to be about three per cent.

Toronto hasn’t seen vacancy rates above two per cent in about a decade, Hildebrand said.

“We’re becoming very used to how under-supplied the rental market has become,” he said.

“If you look at it in absolute terms, the number of vacant units increased by 1,300 units versus last year but we’re seeing demand for rental grow right now by over 2,000 units per month so that increase in total number of vacancy is less than a month’s supply. It’s still very tight,” Hildebrand said.

The actual number of rental starts declined last year to 4,172 units from 2018’s high of 5,620. There were also fewer completions, only 3,630 units compared to 1,465 in 2018.

Among 71 apartment buildings completed since 2005, the average rent for available units in the fourth quarter of 2019 was $2,491 per month. That was based on an average unit size of 751 square feet and didn’t include utlities or parking. Rents for similar units in buildings that were completed last year were $2,658 on average.

Hildebrand said the findings suggest Toronto will continue to rely on condos that comprise about 20 per cent of the city’s rental housing and ideally it could use a higher share than the 35 per cent of condos that have been used as rentals for the last four years.

“If it was a 40 per cent share we’d have an extra 25,000 units in the market,” he said.

There was an 18 per cent jump in the number of condo rental listings in the fourth quarter as new projects were completed and more older units also hit the rental supply.

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“Either existing owners are holding onto their units as rentals when they move on so they’re converting them from owner-occupied units into rental units,” he said, “or we’re starting to see some units being converted from short-term rentals into long-term rentals.”

Meantime, condo rents are beginning to moderate — up four per cent in the fourth quarter of 2019, compared to an 11 per cent year-over-year increase in the fourth quarter of 2018.