Building for renters: An overlooked part of Canada’s housing strategy

Canada ranks among the world’s most unaffordable housing markets. Addressing this issue demands a coordinated response from builders, policymakers, and other key stakeholders. To meet the challenge, a comprehensive suite of solutions is required—chief among them, the expansion of purpose-built rental housing—as more Canadians turn to renting. 

Rental is “the sector that serves everyone,” says Michael Owen, a Partner with the Montreal-based real estate developer Mondev.  

“The acquisition of property has become so difficult for people; rental is kind of the only option left for a big part of the population,” Owen says. 

There are signs Canada is becoming a nation of renters. The number of renter households grew more than twice as fast (up 21.5 %) as the number of owner households (up 8.4 %) from 2011 to 2021, according to Statistics Canada. This demand for rental units further accelerated from 2022 to 2024, as the housing crisis deepened. For renters today, the result is limited vacancies, high rents—and no end in sight.  

Currently, the high costs of construction and government development charges are effectively acting as barriers to starting new projects, making it difficult for developers to get shovels in the ground when we need them to be increasing the pace. Owen notes that in Montreal, growing ancillary costs like street rental fees during construction, permit fees, and rezoning application fees are adding substantial costs to projects, and as a result disincentivizing building and reducing affordability. 

“The reality is that nobody’s going to build if it’s not profitable,” says Mondev founder David Owen.  

The barriers to building

While expanding housing supply is a clear national priority, turning that priority into housing stock is a far more complex task. 

Many industries, such as agriculture and manufacturing, have successfully scaled through automation and digitization. The housing market, however, presents a different set of challenges. It’s locally based, heavily regulated, and involves many fixed costs. Innovative approaches like manufactured housing have a role to play in alleviating some segments of the housing crisis—particularly single-family homes, multi-family townhouses and some high-rise modular components—but building entirely modular large, multi-story rental projects at scale is still a ways off. 

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Adrian Rocca, CEO of Toronto-based Fitzrovia, which develops and manages purpose-built rentals, notes that razor-thin margins make it increasingly difficult to attract investor capital—posing a significant barrier to launching new projects. 

“Margins are squeezed for developers,” Rocca says. “In order to make it justifiable to invest in a development project and go vertical, there needs to be a certain margin attached to it. Otherwise, no one in their right mind would take the risk and break ground.” 

Lengthy timelines are a significant challenge as well. He estimates that, even with a new rental housing project ready for immediate launch and an expedited process, it would still take approximately four years to complete from start to finish. 

When projects finally do hit the market, the prices are too often out of reach for many prospective renters due to increasing construction and government related costs as well as higher interest rates. In Montreal, Michael Owen estimates the base level cost of developing a family-sized unit with three bedrooms is “probably $700,000 or $800,000.” 

“That’s for a very simple family home—the land, hard cost labor, soft cost interest, and then taxes—I’m not making a dime on that number,” he says. “If that’s the true cost that the developer puts in upfront, how many young families can afford the rent we’ll have to charge?  

That’s why, in his words, “The housing crisis is an affordability crisis.” 

The call to remove government fees

With a new federal government in place, developers are eager to see if Canada can get moving on the need to “build, build, build.” There are growing calls for the government to remove some of the cost barriers to development. 

Rocca says, “If you look at total development costs, about 30% are made up of government levies and fees. We are asking and advocating all three levels of government to waive those development charges and all municipal fees and levies, first and foremost.” 

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Other ways that the government could stimulate development are to offer a property tax abatement to help make up for the costs associated with new builds, he says, and give more builders access to low-cost financing for rental housing construction through the Canada Mortgage and Housing Corporation’s Apartment Construction Loan Program. 

Another interesting proposal is for all three levels of government to introduce infrastructure bonds, to bring in new capital that’s been sitting on the sidelines.  

“It’s the easiest thing government should be able to do, to get other forms of capital to the table—whether it’s private capital, retail capital, ultra-high net worth capital, or institutional capital,” Rocca says. “That could be a game changer.” 

In a similar vein, David Owen suggested that if the government offered developers direct incentives to build, it would change the equation. He proposes that providing $175,000 per affordable unit to for-profit builders — as is done for non-profit builders — could trigger a construction boom.  

“If they would give us $175,000 a unit, we could deliver those units at an affordable price. I can tell you; you would see cranes everywhere.” 

Making rental a lifestyle

While Canadians have long prized home ownership, Fitzrovia is building properties that Rocca believes will change hearts and minds.  

“I think there’s a negative stigma around renting that needs to change over time. We’re very much trying to do that, with our homes being kind of disruptors in the market.” 

Fitzrovia is thinking critically about what Toronto’s growing number of renters need, and what will convince them to settle down and become long-term tenants.  

Rocca explains how they made a bold call to offer an in-house early childhood education centres and partner with Cleveland Clinic Canada to offer access to virtual healthcare. These types of services are particularly attractive for families with young kids and new immigrants who don’t have OHIP or a family doctor. The buildings also have hotel-stye amenities and run activities like annual summer pool parties and Raptors viewing parties, helping to sell people on the lifestyle and add value given today’s higher rents.  

“We really want to create a strong sense of community,” Rocca says. “We really would love to have long term, lifetime residents—people who go from our student housing right to our retirement communities.” 

The crisis could reach new levels

On our current trajectory, the housing shortage will get worse before it gets better.  

The latest projections from the Canada Mortgage and Housing Corporation (CMHC) find that to improve affordability, housing starts must nearly double to around 430,000 to 480,000 units per year until 2035 to meet projected demand.  

However, in Toronto, new starts are down 70 to 90 percent in the purpose-built rental space, according to Rocca. Hitting the brakes like this will have significant ramifications, and soon. 

First, it will worsen the supply shortage, which will drive up prices. Secondly, course-correcting could become even more difficult, because of a growing construction labour shortage. 

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Rocca observes that amid the current construction slowdown, tradespeople are leaving the industry to find work elsewhere. He worries they might not return. 

“My biggest concern is that, when the market does come back, we aren’t going to have the talent pool to ramp back up,” Rocca says. 

When housing reaches unaffordable levels, the whole region suffers as a result. In a new survey from CivicAction, 29% of respondents in the Greater Toronto Hamilton Area said they spend more than 50% of their income on housing. This is an unsustainable situation that could push Canada’s middle class — think nurses, teachers, skilled tradespeople — further out of the urban areas that need their services. 

Canada’s builders, policymakers, and other stakeholders need to act quickly to stimulate the supply of new rental options, because the longer the status quo persists, the deeper the hole we find ourselves in.   

“Every day that goes by that we are not building new housing is going to compound this issue,” Rocca says.