A new report examining rental housing availability in Canada’s largest cities says Toronto isn’t equipped to handle an expected explosion in demand for rental units over the next three to four years.

The report by RBC Economics entitled Big City Rental Blues: A Look at Canada’s Rental Housing Deficit urges that the pace of creating new rental housing supply “must double” in Toronto if the city is to meet future demand.

“Despite purpose-built apartment construction rising fourfold since 2014, rental supply is unlikely to come close to demand (in Toronto) in the coming years. A deliberate policy to boost rental supply is needed — with specific targets and incentives to achieve them,” states Robert Hogue, the report author and senior economist with RBC Economics.

“Our view is you need to go a bit further to be active and put incentives in place to get it (increasing rental supply) done,” Hogue said in an interview.

“We are in a crisis situation. We need a more active policy response,” he added.

The report predicts that the number of renter households — households where people opt to rent rather than own — will go up by an average of 22,200 per year in Toronto between now and 2023. Vancouver meanwhile will see an average yearly increase of 9,400 per year, Calgary 4,300 per year and Montreal 8,200.

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But signs are more hopeful in Montreal and Vancouver, where strong apartment and condo construction is expected to send a “wave of new rental units to market” in those cities the report states.

(Calgary has a 3.9 per cent vacancy rate, so the rental unit availability picture there isn’t dire, the report notes, although it adds that the city is dealing with a provincial economy that has softened since a 2015-2016 downturn.)

The RBC study, released Wednesday, also estimates that as of late last year the Toronto market had a “deficit” or shortfall of 9,100 available rental units, Montreal 6,800 units, Vancouver 3,800 units. These estimates represent the number of rental units (both purpose-built and rented out in condos) required to “balance” the rental market.

Balance is when a city has a rental vacancy rate of 3 per cent, says RBC’s Hogue.

The RBC report using Canada Mortgage and Housing Corporation figures noted the vacancy rate was 1.1 per cent for Toronto at the end of the last three months of 2018.

The report stated that provincial and municipal measures reducing regulatory hurdles for basement apartments and laneway housing, for example, will help reduce the gap in the number of available rental units required in Toronto, the report says. In addition, condo investors potentially could add more rental units by buying into the market.

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But it’s unlikely these alternative sources can deliver the high numbers necessary to balance the rental market in Toronto (3 per cent vacancy) the report goes on to say.

To restore balance over a two-year time frame for example, Toronto’s rental stock must expand by an average of 26,800 units per year, the report notes.

Provincial policy must be “tipped in favour” of building new rental supply (of both below and at-market rental units), the report later states, adding this could involve “sweetening” existing rental housing funding programs or providing development charge rebates.

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