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While the average rent in the GTA rose close to 12 per cent last year to a record $2.77 per square foot, the growth was driven by more expensive leases: 52 per cent of leases were above $2.75 per square foot in 2016, more than double the 25 per cent in 2015. Combined with reduced turnover rates, CIBC says this suggests that young families are increasingly accepting the rental market as their means for living in the GTA.

The reduced turnover contributed to a 9 per cent decline in the number of leases last year, while demand for rentals saw no decline.

“The GTA market is fast approaching a full-blown affordability crisis,” Tal wrote in a note. “The market will eventually be tested when interest rates rise and/or the economy faces its next recession. What we do between now and then will determine the ability of the region to face that test.”

CIBC argues that increasing the supply of purpose-built apartments — in the last two years the number under construction in the GTA has gone from less than 2,000 to more than 5,000— would make a significant contribution to heading off a potential market calamity.

Purpose-built apartments make up just over 16 per cent of new rentals, but the bank’s analysts say that municipalities could take one or more policy steps to increase that number: including the expediting of approvals for purpose-built projects, “offer higher intensification rates for purpose-built developments”, “cut the HST charged on the development” and the elimination or reduction of development charges, which are currently the same for condo and purpose-built projects.