The Greater Toronto and Hamilton Area is expected to see 6,821 new rental homes completed this year. This is a "multi-decade high", according to Urbanation's latest rental report. Indeed, you need to go back to the 1970s to get rental supply figures of this magnitude.

A big part of this has to do with the fact that we are now taxing rental housing less. Toward the end of last year, the federal government removed their portion of the HST on new rental housing and, then in November, the province of Ontario followed with theirs.

This was "a big first step" for the industry, according to leading apartment developers like Fitzrovia.

But there's another reason that many developers are now looking to purpose-built rentals: fewer people are buying new condominiums. And if you can't presell condos, well then you're going to need to find another path forward for your land.

However, flipping over to rental is not necessarily a panacea. The margins are generally razor thin (+/- 50 bps). It requires more and different capital (typically). And you need to believe in some fairly non-consensus assumptions (high rent growth, low cap rates, etc.).

It'll be interesting to see how many developers are able to successfully flip over to rental and how sustained this rental supply number will be.

This morning I toured 1151 Queen East (here in Toronto). It is a new 47-suite apartment building that is being developed by Hullmark and that was designed by Superkül (the same architects as Junction House). It's not quite finished yet, but it is looking terrific. The interiors feel, to me, like Berlin meets classic Miami Beach (if you can picture whatever this means). So a big congrats to the entire team. I'm sure it will be well-loved once people start moving in this year.

At the same time, it's hard not to see small and beautiful infill projects like this and wonder, "why do we make it so difficult to build this kind of new housing? This is a 6-storey rental building that, according to Urban Toronto, was first proposed in 2018. It then had to go through the typical rezoning process, which, in this case, seems to have taken two years. Now we're in 2024. Uh, why?

We should be looking at this kind of infill housing and saying, "Yes! You should go ahead and build this right now. Let us help you with that." Instead, we erect barriers, which only force developers toward ever larger projects. If you're going to spend two years in rezoning, no matter the scale of the development, why not build 470 homes instead of 47? And this has only been exacerbated with higher interest rates, because now time costs you that much more.

I say all of this because this is an objectively great infill project. Our city would be a better place with a lot more of these.

"Your local self-inflicted housing criss ouroboros" tweeted this chart out over the weekend, showing the number of new rental suites completed in Toronto since 1900. The data is from Open Data Toronto and it does not include any condominiums. It also only includes apartment buildings with 10 or more suites (which would be most of the supply anyway).

This chart is a good example of what we spoke about yesterday: "If you want to negatively impact new supply, cap rental growth." And that's exactly what was done in the 1970s. But in reality, the changes were more broad than this. The 1970s saw a philosophical shift in the way Canada thought about new housing.

Housing became rightly viewed as a basic human right. But because of this, the policy landscape shifted away from facilitating the private sector, to intervening and regulating the private sector. This included tax changes which negatively impacted new housing development and, yes, rent controls.

Ironically, but not unexpectedly, this dramatically lowered the overall supply of new rental housing. To the point where we had effectively shut off the taps by the late 1990s. Thankfully, the condominium sector stepped in and started meaningfully delivering new housing -- both for sale and for rent (via individual private investors).

The supply of new condominiums in Toronto is not shown above, but there is no question that this (shadow rentals) has formed the vast majority of our new rental stock over the last two decades. But in my view, this shift was largely the result of policy decisions. We decided that we didn't want the private sector building so many new purpose-built rentals, and so we told them to stop.

It then listened remarkably well.