One of the basic principles behind rent control policies is that you're trying to make housing more affordable for some, while at the same time more expensive for others. Economics is the study of choice, and this is a choice, whether it gets talked about or not. Previously, we spoke about a memo from Howard Marks where he describes the impact of rent control in New York City. In economic terms, that impact looks like this:
Some people who couldn't afford to live in New York City if rents were set by the free market get the opportunity to live in the city (their housing is more affordable)
Other people who would like to live in New York City and could afford higher rents can't because there are no available apartments (rent controls reduce housing supply)
And lastly, landlords with unregulated apartments can command higher rents than would be the case if new housing supply were not being discouraged (their housing is more expensive)
Today, let's talk about a recent research paper (June 2025) published in the Journal of Housing Economics called, "Rent control and the supply of affordable housing." What the authors discovered was the following:
Restrictive rent control reforms are associated with a 10% reduction in the total number of rental units available in a city
Restrictive rent control reforms led to an increase in the availability of units affordable to extremely low-income households
This was offset by a decline in the availability of units to other income groups, particularly those at slightly higher affordability thresholds
Once again, we see the economic trade-offs inherent in supply-side interventions like rent control. It's better for some and worse for others. However, governments tend to favor it because it's "free" to them; the costs are borne by landlords and renters at higher affordability thresholds. I'll let all of you comment on whether you think this is good or bad, but regardless, I think it's crucial that we acknowledge the trade-offs being made.
Cover photo by Benjamin Ashton on Unsplash
Before laneway homes were permitted as-of-right in Toronto, many people couldn't imagine them being a viable housing solution, let alone a desirable housing solution. I vividly remember some critics arguing that only people of questionable moral fiber would want to live in a laneway. Toronto's laneways were only suitable for garages, cars, graffiti, and degenerates, apparently.
If you're a longtime reader of this blog you'll know that I've always felt differently. In 2014, I wrote a post calling laneway homes the new loft. And in 2021, after Mackay Laneway House was finished, I wrote that "slowly but surely, we will start to think of our lanes not as back of house, but as front of house." I went on to surmise that, one day, our laneways could even become the more desirable side of a property.
I was reminded of this prognostication earlier this week when a friend of mine, who is very active in the multiplex space, was touring me through one of his construction sites. What struck me is that he said that on every single one of his projects, the highest-grossing suite is always the laneway or garden suite. It commands the highest rent and it's what gets the most showings.
This, of course, makes sense. It's a standalone structure, whereas the other homes in a multiplex building are not. And if you have the site area to do two storeys, these suites can become relatively large — oftentimes between 1,200 and 1,400 sf. Laneways are also intimate and largely pedestrian-oriented streets, so a nice place to live.
But there's some hindsight bias in this obviousness. It wasn't that long ago that most Torontonians couldn't imagine a "house fitting behind a house." It was an unthinkable solution that would ruin the character of our low-rise neighborhoods. Now we have planning policies that not only allow them, but that are, in a way, promoting an inversion in the way our low-rise neighborhoods function.
Toronto's policies allow up to six suites on the "front" of certain properties, plus a laneway or garden suite at the "back," for a total of 7 suites. The effect is that an entirely new single-family house layer is today getting built on our laneways. An alternative way to think about this is that it's like taking an existing single-family house, pushing it to the back, and then building a small "houseplex" in the front.
One of the basic principles behind rent control policies is that you're trying to make housing more affordable for some, while at the same time more expensive for others. Economics is the study of choice, and this is a choice, whether it gets talked about or not. Previously, we spoke about a memo from Howard Marks where he describes the impact of rent control in New York City. In economic terms, that impact looks like this:
Some people who couldn't afford to live in New York City if rents were set by the free market get the opportunity to live in the city (their housing is more affordable)
Other people who would like to live in New York City and could afford higher rents can't because there are no available apartments (rent controls reduce housing supply)
And lastly, landlords with unregulated apartments can command higher rents than would be the case if new housing supply were not being discouraged (their housing is more expensive)
Today, let's talk about a recent research paper (June 2025) published in the Journal of Housing Economics called, "Rent control and the supply of affordable housing." What the authors discovered was the following:
Restrictive rent control reforms are associated with a 10% reduction in the total number of rental units available in a city
Restrictive rent control reforms led to an increase in the availability of units affordable to extremely low-income households
This was offset by a decline in the availability of units to other income groups, particularly those at slightly higher affordability thresholds
Once again, we see the economic trade-offs inherent in supply-side interventions like rent control. It's better for some and worse for others. However, governments tend to favor it because it's "free" to them; the costs are borne by landlords and renters at higher affordability thresholds. I'll let all of you comment on whether you think this is good or bad, but regardless, I think it's crucial that we acknowledge the trade-offs being made.
Cover photo by Benjamin Ashton on Unsplash
Before laneway homes were permitted as-of-right in Toronto, many people couldn't imagine them being a viable housing solution, let alone a desirable housing solution. I vividly remember some critics arguing that only people of questionable moral fiber would want to live in a laneway. Toronto's laneways were only suitable for garages, cars, graffiti, and degenerates, apparently.
If you're a longtime reader of this blog you'll know that I've always felt differently. In 2014, I wrote a post calling laneway homes the new loft. And in 2021, after Mackay Laneway House was finished, I wrote that "slowly but surely, we will start to think of our lanes not as back of house, but as front of house." I went on to surmise that, one day, our laneways could even become the more desirable side of a property.
I was reminded of this prognostication earlier this week when a friend of mine, who is very active in the multiplex space, was touring me through one of his construction sites. What struck me is that he said that on every single one of his projects, the highest-grossing suite is always the laneway or garden suite. It commands the highest rent and it's what gets the most showings.
This, of course, makes sense. It's a standalone structure, whereas the other homes in a multiplex building are not. And if you have the site area to do two storeys, these suites can become relatively large — oftentimes between 1,200 and 1,400 sf. Laneways are also intimate and largely pedestrian-oriented streets, so a nice place to live.
But there's some hindsight bias in this obviousness. It wasn't that long ago that most Torontonians couldn't imagine a "house fitting behind a house." It was an unthinkable solution that would ruin the character of our low-rise neighborhoods. Now we have planning policies that not only allow them, but that are, in a way, promoting an inversion in the way our low-rise neighborhoods function.
Toronto's policies allow up to six suites on the "front" of certain properties, plus a laneway or garden suite at the "back," for a total of 7 suites. The effect is that an entirely new single-family house layer is today getting built on our laneways. An alternative way to think about this is that it's like taking an existing single-family house, pushing it to the back, and then building a small "houseplex" in the front.
Ironically, all of these policies were born out of a deep desire to not change the character of existing neighborhoods. It's why no one would dare call these six-unit structures anything resembling an apartment. They are house-plexes, which are just like single-family houses, but with an added plex in the name. Nothing out of the ordinary to see here.
But our neighborhoods are changing and they will continue to change. The market is already speaking in terms of which new homes it finds most desirable. And in the end, that's a good thing. Change and evolution are features, not bugs, of cities. When Toronto stops growing and adapting, that's when we need to start worrying.
Back in 2014, I compared laneway housing to lofts because of the latter's origin story. When manufacturing began to leave cities and warehouses started to get converted to apartments, they were viewed as dangerous, illegal misuses of commercial spaces. It was housing that no respectable middle-class person would want to live in.
Then the opposite became true. Loft living became a symbol of urban cool, so much so that every new apartment somehow became a "loft." I'm not suggesting that Toronto's laneway suites are about to stage a global takeover in quite the same way, but some 11 years later, I do think it's following the same arc of desirability. The things we desire aren't as enshrined as they may seem.
Cover photo by Nikhil Mitra on Unsplash
Last year, the GTHA recorded 29,671 new condo completions. This was some sort of a record. This year, condo completions are projected to total around 31,396 homes. Even higher. But then completions start to fall off, with 17,487 homes scheduled for completion in 2026. By 2029, this number is expected to be close to 1,000. So let's call it zero for argument's sake.
If we are to crudely assume that 50% of these new condominiums ultimately make it to the secondary condo rental market, then we are expecting nearly 16,000 condo rentals this year, just under 9,000 condo rentals in 2026, and ultimately no new condo rentals by around 2029 (or some number close to it).
Now let's consider the purpose-built rental side of the equation.
The 10-year average for purpose-built rental apartment starts in the GTHA is only 2,819 homes. This is a far cry from the volume of rental housing that we delivered in the 60s and 70s. Of course, with the new condominium market largely shut off, there's renewed interest in building purpose-built rentals.
In 2024, purpose-built rental apartment completions totalled 5,537 homes. And in the first half of this year, 3,156 homes reached the occupancy stage. Extrapolating out, I'm guessing that puts us somewhere around 6,000 new purpose-built rental apartment homes by the end of 2025.
If we pause and think about only 2025, we're on track to deliver roughly 37,000 new condo/rental apartments and ~22,000 new rental homes (again assuming 50% of the new condominiums become secondary rentals). I view this as our peak supply year for this cycle.
There's a lot of talk about a "record" number of purpose-built rental apartments now under construction, and while it is true that the numbers are elevated compared to the latest 10-year average, it is not a long-term record compared to the 60s and 70s and, more importantly, it is not enough to offset our dwindling new condominium supply.
Even if purpose-built rental completions spiked to 8,000 or even 10,000 new homes next year, we are still going to see a drop in new rentals and new housing overall in the GTHA. 2026 is the turning point year where new supply turns south. And it's going to keep going south until probably 2029, which is when I believe we will see supply bottom out.
Nothing in this post should be construed as investment or development advice, but here's the way I'm thinking about it:
2025: ~37,000 new condominium/apartment homes (peak supply year resulting from the pandemic boom)
2026: ~25,000 new homes (supply begins its decline)
2027: ~18,000 new homes
2028: ~10,000 to 13,000 new homes
2029: ~8,000 to 10,000 new homes (supply bottom)
I have no idea what will happen with interest rates, immigration, investor sentiment, and the countless other factors that impact a housing market, but even if things started to turn around next year, it would be mostly impossible to avoid the housing supply bottom that I believe we have coming in 2029. Buildings take a long time to build.
Conclusion: I think that 2026 will prove to be an excellent year to buy assets (land, unsold inventory, IPP, and so on), and that 2028 onward will be an excellent time to be delivering new homes. By then, we should be dramatically undersupplying the market. It doesn't feel that way today, but eventually the bill from our frozen development market will come due.
Cover photo by Adam Vradenburg on Unsplash
Ironically, all of these policies were born out of a deep desire to not change the character of existing neighborhoods. It's why no one would dare call these six-unit structures anything resembling an apartment. They are house-plexes, which are just like single-family houses, but with an added plex in the name. Nothing out of the ordinary to see here.
But our neighborhoods are changing and they will continue to change. The market is already speaking in terms of which new homes it finds most desirable. And in the end, that's a good thing. Change and evolution are features, not bugs, of cities. When Toronto stops growing and adapting, that's when we need to start worrying.
Back in 2014, I compared laneway housing to lofts because of the latter's origin story. When manufacturing began to leave cities and warehouses started to get converted to apartments, they were viewed as dangerous, illegal misuses of commercial spaces. It was housing that no respectable middle-class person would want to live in.
Then the opposite became true. Loft living became a symbol of urban cool, so much so that every new apartment somehow became a "loft." I'm not suggesting that Toronto's laneway suites are about to stage a global takeover in quite the same way, but some 11 years later, I do think it's following the same arc of desirability. The things we desire aren't as enshrined as they may seem.
Cover photo by Nikhil Mitra on Unsplash
Last year, the GTHA recorded 29,671 new condo completions. This was some sort of a record. This year, condo completions are projected to total around 31,396 homes. Even higher. But then completions start to fall off, with 17,487 homes scheduled for completion in 2026. By 2029, this number is expected to be close to 1,000. So let's call it zero for argument's sake.
If we are to crudely assume that 50% of these new condominiums ultimately make it to the secondary condo rental market, then we are expecting nearly 16,000 condo rentals this year, just under 9,000 condo rentals in 2026, and ultimately no new condo rentals by around 2029 (or some number close to it).
Now let's consider the purpose-built rental side of the equation.
The 10-year average for purpose-built rental apartment starts in the GTHA is only 2,819 homes. This is a far cry from the volume of rental housing that we delivered in the 60s and 70s. Of course, with the new condominium market largely shut off, there's renewed interest in building purpose-built rentals.
In 2024, purpose-built rental apartment completions totalled 5,537 homes. And in the first half of this year, 3,156 homes reached the occupancy stage. Extrapolating out, I'm guessing that puts us somewhere around 6,000 new purpose-built rental apartment homes by the end of 2025.
If we pause and think about only 2025, we're on track to deliver roughly 37,000 new condo/rental apartments and ~22,000 new rental homes (again assuming 50% of the new condominiums become secondary rentals). I view this as our peak supply year for this cycle.
There's a lot of talk about a "record" number of purpose-built rental apartments now under construction, and while it is true that the numbers are elevated compared to the latest 10-year average, it is not a long-term record compared to the 60s and 70s and, more importantly, it is not enough to offset our dwindling new condominium supply.
Even if purpose-built rental completions spiked to 8,000 or even 10,000 new homes next year, we are still going to see a drop in new rentals and new housing overall in the GTHA. 2026 is the turning point year where new supply turns south. And it's going to keep going south until probably 2029, which is when I believe we will see supply bottom out.
Nothing in this post should be construed as investment or development advice, but here's the way I'm thinking about it:
2025: ~37,000 new condominium/apartment homes (peak supply year resulting from the pandemic boom)
2026: ~25,000 new homes (supply begins its decline)
2027: ~18,000 new homes
2028: ~10,000 to 13,000 new homes
2029: ~8,000 to 10,000 new homes (supply bottom)
I have no idea what will happen with interest rates, immigration, investor sentiment, and the countless other factors that impact a housing market, but even if things started to turn around next year, it would be mostly impossible to avoid the housing supply bottom that I believe we have coming in 2029. Buildings take a long time to build.
Conclusion: I think that 2026 will prove to be an excellent year to buy assets (land, unsold inventory, IPP, and so on), and that 2028 onward will be an excellent time to be delivering new homes. By then, we should be dramatically undersupplying the market. It doesn't feel that way today, but eventually the bill from our frozen development market will come due.
Cover photo by Adam Vradenburg on Unsplash
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