An Ontario landlords’ association wants the province to test new zoning rules in areas around transit, declining strip malls and underused industrial land to encourage the development of more purpose-built apartments.

It would be a start in stemming a deepening rental crisis that could see Ontario short of up to 100,000 units in another decade.

Tony Irwin, CEO of the Federation of Rental-housing Providers of Ontario (FRPO), said he’s not arguing for greater density in established neighbourhoods. But approval times, neighbourhood opposition, development charges and other government fees are adding costs that make rental development less viable.

One solution would be to allow builders to save on the cost of land by intensifying “unicorn sites” — properties with existing rental buildings that have room for more, he told an Empire Club lunch on Tuesday. Those sites “represent untapped potential to put new units on the market without any cost to buy new land,” he said.

“Projects underway today are based on land prices from two or three years ago,” Irwin said. “Land in Toronto may have been valued at $75 a buildable square foot then. Today, land prices have tripled or quadrupled meaning many projects you see in the queue would not proceed if the decision was being made today.”

An updated study for the association by market research firm Urbanation shows that Ontario needs to build 7,000 to 10,000 new rental units a year. In 2017, that number was predicted to be 6,000. Even though rental housing development is up, it is far outstripped by the demand driven by a booming population, high employment and declining home ownership, says Urbanation’s report.

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The supply of purpose-built apartments increased by 1 per cent or 6,800 units last year. But that was still less than the 8,500 that came on-stream in 2017.

FRPO, which represents 2,200 landlords and building managers housing 350,000 households, is also recommending the government allow higher annual rent increases so landlords can maintain aging buildings, the vast majority built before 1980. Rather than the province’s 1.8 per cent allowable annual rent increase, landlords should be able to raise rents annually by the rate of inflation, plus 2 per cent, he said.

Given Ontario’s 16-year-low vacancy rates — in the city of Toronto, they were around 1 per cent last year — tenants are staying in their apartments longer. That means landlords lose their only opportunity to raise rents to market levels when someone moves out. Some landlords that used to see 25 to 30 per cent turnover annually are now reporting rates closer to 10 per cent, Irwin said.

“This, coupled with rising pressure from organized groups fighting above-legal guideline rent increases, has made the climate for operating rental housing very challenging. That climate informs investment decisions,” he said.

The Ontario government eliminated rent controls on any new units occupied after mid-November in a move it said would help encourage supply.

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Development rules favour condos, said Toronto councillor Ana Bailao, council’s housing advocate, who attended Irwin’s speech.

“We need to give priority for rental in this city. We know when a piece of land comes up for development, the economics always favour condo. As we develop policy at a city and provincial level we need to take those things into consideration and have more of a level playing field,” she said.

In Vancouver, landlords of new buildings have some flexibility on rents so they can assess their cash flow in the early years, Bailao said.

“It’s a balance,” she said. “Fifty per cent of our residents are tenants and they need some protection. As much as we want the investment, it’s a balance we need to strike between having investment come to our city and having good protection for our tenants.”