A Reminder Of The Importance Of Defining Purpose-Built Rentals

In this website’s second post, which I made back in July 2019, I explained how the rental supply should always be broken down into purpose-built and non-purpose-built rentals. Purpose-built rentals are dwelling units intended to be used as rentals and are usually found in multi-unit apartment buildings and townhouse complexes. Non-purpose-built rentals are dwelling units intended to be owned but at some point and for some period were rented by their owners to renters.

Separating these two categories is important since they aren’t the same beasts: purpose-built rentals are the long-term, stable rental supply of rentals supported and managed with the legal framework provided by the Ontario Landlord & Tenant Act and associated regulations, while non-purpose-built rentals are for the most part a temporary, unstable supply of rentals since landlords (who in most cases are individual dwelling owners) can add or remove them from the overall pool of rentals at any time: the total supply of purpose-built rental dwellings or units is usually very stable and usually increasing, while the total supply of non-purpose-built rentals is always fluctuating.

So, why am I revisiting this? The Toronto Star this past Saturday (April 25, 2020) had an article in their business section quoting Shaun Hildebrand of the Toronto-based consulting firm Urbanation Inc. who said that tenants in Toronto might see some “rent relief” thanks to the current virus pandemic and related economic downturn. You can read the full article via the link below. (The online article is dated April 17th and I saw it in the print version on the 25th.)


Here’s the money quote:

“More than a month after the economy ground to a halt, slowing housing construction, he [Hildebrand] still believes there will be enough new apartments this year to help bring rents down as much as five per cent.”

Hildebrand cites a drop in units leased and a large number of condos and purpose-built rentals in the development pipeline as reasons for his expectation. I don’t doubt that the data he’s looking at supports his view, and I’m pleased to see the Toronto Star reporter, Tess Kalinowski, mention “purpose-built rentals” as opposed to simply “rentals”. However, it is not appropriate to include new condos as part of the rental supply since those aren’t officially slated to be rentals and therefore constitute an unstable and unpredictable addition to the overall rental supply, as I explained above. In other words, projecting future demand and rents based on an in-the-pipeline supply of units which are not guaranteed to end up being used as rentals is problematic.

This is not a criticism of Urbanation, a firm which does great work and a great job monitoring Toronto’s multi-unit housing supply. This is simply a caution readers should keep in mind when reading about “rental housing” statistics, since not all rental housing is the same.