Luxury Purpose-Built Rentals Are Shaking Up Toronto’s Gloomy Housing Market

21 August 2018
Joshua Chisvin

Over the last several years, housing options for renters in Toronto have been gloomy.

That might be putting it mildly, to be honest.

Sure, you could rent an apartment in an old high-rise, a floor in a chopped-up Victorian house or a unit in a condominium, where, at any given moment, you might face eviction if the owner decides they want to move in.

However, for the first time in decades, there’s actually been a slight upward trend in private developers constructing an array of new purpose-built rental projects.

Housing advocates say this is crucial to fixing Toronto’s city’s housing crisis.

According to a study published last year by the Ryerson City Building Institute and Evergreen, a non-profit focused on sustainable urban planning, around 8,000 new purpose-built rental units need to be constructed each year to keep up with the city’s housing market.

What's more, according to data from real estate analysts Urbanation Inc., 2,669 purpose-built rental units across nine projects will be built by the end of the year.

In comparison, over the last decade, the purpose-built rental market has only grown by 2,400 units.

Now, unlike traditional apartment buildings, this new crop of purpose-built rental projects is ripe with high-end amenities typically found in sleek condos.

That's right, everything from gym facilities, yoga rooms, movie theatres and party rooms to dog parks, 24/7 concierge desks and rooftop gardens.

Sure, generally these types of luxury rentals cater to baby boomers looking to downsize from single family homes.

Same goes for young professionals priced out of home ownership or those who want condo amenities, only don’t want to commit to buying a unit.

One of these new rental projects is Minto’s 39 Niagara, located near Front and Bathurst.

It features just over 500 rental units across a mix of studios, one- to three-bedroom suites and townhomes, along with luxury amenities like a swimming pool, sauna, steam room and urban garden with fire pits and barbeques. Tenants will start moving in July 2019.

39 Niagara is Minto's first project in Toronto decked out with so many extra features, indicating that renters have higher expectations around amenities.

Near Yonge and Eglinton, Rockport Group is currently building the 233-unit, 27-storey The Montgomery, complete with a dog run, outdoor pool, concierge, gym, yoga room and party room.

Designed by RAW Design, it’s situated atop a 1930s Art Deco heritage building and located at the former site of a staging point during the Upper Canada Rebellion of 1837.

Truth be told, this was expensive land and it would have been a slam dunk as a condo, but the site was too deemed too wonderful by Rockport Group's CEO, Jack Winberg, to build out and sell.

Instead, Rockport Group figured out a way to own it as part of our portfolio as a purpose-built rental building. That seemed to be the best investment opportunity.

Developers who specialize in condos are now branching out into purpose-built rental projects because Toronto’s rising rents are appealing to investors.

Yes, the rents are now at the point where institutional investors are able to achieve returns on purpose-built rental.

Indeed, at the Montgomery, rents range from $1,920 for a 485-square-foot studio to $6,055 for a three-bedroom, two-bathroom 1,101-square-foot unit. Although Minto wouldn’t provide specific rents for 39 Niagara, they will be priced comparably to the market rent for purpose-built rentals with similar amenities.

With a vacancy rate at less than 1% and a troubling rise in personal-use evictions and renovictions, Toronto’s rental housing market is in crises. That much is certain.

Can luxury purpose-built rental help address the problem?

Some say that although what the city desperately needs is affordable rental units that can accommodate families, luxury purpose-built rental projects like the Montgomery and 39 Niagara fulfill a big need for people who are downsizing or mid-life professionals who work and live downtown.

Although these rental projects aren’t affordable now, they could be in the future. 

After all, built in the '50s, '60s and '70s, all the huge towers that are around our city were originally luxury apartments for upper-middle class families.

But, over the years, those buildings age, our cultural expectations change, people move into other housing types and now those apartment towers are some of the most affordable we have.

This is how filtering happens: you add to the housing stock, which changes over time.

At the old site of Honest Ed’s, Westbank’s massive new project will total nearly 900 rental units and feature amenities like a daycare, co-working spaces, acoustically protected music rooms where residents can play instruments, rooftop gardens for urban agriculture, dog parks and fitness facilities.

Roughly 40% of the units will have two-, three- or four-bedrooms — definitely ideal for families.

Despite the majority of the units being priced at market rent, 10% will be affordable, or, more specifically, 80% of the city’s average market rent for a one-bedroom apartment in 2018 — $1,202 — which comes to $962.

When Westbank developers first purchased the site in 2013, they weren’t sure what kind of housing project they would build — condominiums, purpose-built rental or a mix.

After two years of community consultations, it was clear that the neighbourhood wanted rental.

It goes to further exhibit that people are becoming more comfortable with the idea of renting as a lifestyle solution as an alternative to home ownership. Particularly among younger generations, there’s more of a willingness to look at the rental market as a long-term option.

Simply put, communities want to see purpose-built rentals and developers are responding.

SOURCE: NOW Toronto

  Real Estate