Ontario will face a shortage of nearly 200,000 rental units over the next decade, a new study suggests, with other data indicating
London will need between 700 and 800 new units a year
to keep up with the demand.
Job growth, high homeownership prices and ambitious immigration numbers by the federal government are all contributing to an increased demand for rental apartments and rising rent prices in some cities, including London, which is dealing with a low vacancy rate and skyrocketing rent prices.
“The number of completions of rental buildings has been pretty low, historically, over the last two or three decades
so, but the demand has just shot up so significantly,” said Tony Irwin, president of the Federation of Rental-Housing Providers of Ontario (FRPO), the industry umbrella group that commissioned the study.
“The gap is becoming obviously significantly larger.”
The study, completed by rental market analytics firm Urbanation, was based on pre-pandemic data. But market pressures are expected to return once the COVID-19 pandemic is brought under control, Irwin said.
“We fully expect that, at some point, those metrics are going to start to go up again,” he said.
“Bottom line, we need far more supply.”
The study doesn’t provide a specific breakdown of how many units are needed in the London region.
But recent population trends — which include the London region becoming the second-fastest growing area in Canada last year — peg the need for London at between 700 and 800 units each year, said Andrew Scott, a senior analyst with the Canada Mortgage and Housing Corp. (CMHC).
He agrees the virus crisis will have a significant impact on new people arriving in London in 2020, both immigrants and people moving from other parts of the country and the province. But in the long term, the need for new rental-purposed buildings will remain, Scott said.
“The slowdown in immigration and international students is, you know, more of a short-term impact,” he said. “So it’s not necessarily that we need to slow down construction because construction timelines are two to three years.”
By historical standards, construction in London has been strong in the last few years. The city last year topped $1 billion in construction permits for the fourth straight year, making 2019 the second biggest year for building in the city.
CMHC estimates 1,754 rental units are under construction in the city and will be completed at different times over the next three years, with several other projects in the planning stages.
But London could still benefit from more units.
“We’re not really exceeding that estimated number of renter households created in a year, so it’s not really creating much vacant supply,” Scott said. “It’s probably just keeping afloat for now.”
That reality has led to rent prices soaring in the city over the last few years, a trend the COVID-19 pandemic was unable to change.
While the average monthly rent in the Greater Toronto Area has declined by 10.8 per cent since last August, average rents in London have risen over the same period by 11.3 per cent for one-bedroom units to $1,221 and 23.3 per cent for two-bedroom apartments to $1,610, according to Rentals.ca data.
Scott said how long the virus crisis lasts could determine the pace at which new projects are brought to the city.
“The developers and builders in London still seem very interested in purpose-built rental apartment construction,” he said. “But the COVID-19 pandemic, depending on how long it drags on, could really hamper some of the expectations developers and builders have for the future.”