For years, real estate investment has been viewed as a surefire way to generate wealth. But times are changing.
As the Canadian government tightens immigration and international student policies—and global tariffs continue to drive up costs—the dream of easy profits through rental properties is becoming much harder to achieve. In Downtown Toronto, both the resale housing market and the rental market are feeling the squeeze.
A Sluggish Market and Growing Tensions
Right now, the housing market remains subdued. And along with it, the rental market has slowed down significantly. With an increase in supply and growing economic uncertainty, more tenants are falling behind on rent, adding stress to both sides of the landlord-tenant relationship.
So what’s really happening in the Downtown Toronto rental scene?
Uncertainty from Tariffs and Market Sentiment
Tariffs on construction materials and global economic instability have created a sense of hesitation. While interest rate cuts last year briefly revived buyer confidence and activity picked up, that momentum quickly reversed when tariffs added new uncertainty.
Many buyers stepped back. Homeowners facing rising carrying costs rushed to list their properties, hoping to offload them. In fact, Toronto saw a 76% year-over-year increase in new listings this past February. When these properties didn’t sell, many were converted into rentals.
New Condo Supply and Downward Pressure on Rent
Adding to the pressure is the flood of newly completed condos entering the market—many purchased during the 2020–2021 pre-construction boom. These units are now closing, and around 50–60% are being rented out. In 2023 alone, nearly 28,000 new condos were completed across the GTA, with close to 40,000 expected in 2024.
This surge in rental listings has pushed down average rents in parts of Downtown Toronto, even as mortgage costs remain high for landlords. But lower rent doesn’t mean fewer problems—missed rent payments are becoming more common, despite the drop in prices.
Why? Simply put, tenants are struggling financially. Last year, a study showed that 26% of households reported difficulty managing their monthly finances. Nearly 20% had already fallen behind on rent. That number is likely even higher in 2024.
Advice for Downtown Toronto Landlords
In today’s environment, being a landlord is far from easy. Here are a few tips for managing your investment more effectively:
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Retain Your Existing Tenants
If you have good tenants, work hard to keep them. Offer fair rent renewals, be responsive, and maintain open communication. Stable occupancy is more valuable than ever. -
Adjust Your Rent Expectations
For landlords with vacant units, it’s crucial to price rentals competitively. Overestimating rent can lead to prolonged vacancies, which hurts your bottom line even more. -
Screen Tenants Thoroughly
Don’t skip due diligence. Verify employment status, review bank statements, and run credit checks. Avoid tenants who are clearly unable to keep up with rent payments.
What Can the Government Do?
Many landlords feel stuck—especially with rising construction costs driven by tariffs. Developers, too, are pulling back, unwilling to start new projects in an uncertain climate. To help ease the burden, government support could come in the form of reduced development fees or subsidies for affordable housing projects.
For small landlords, access to financing for home renovations or legal secondary suites (like 4+1 configurations) could improve cash flow and reduce the pressure to sell. Many homeowners are eager to renovate and repurpose their existing space, but support is needed to make it viable.
The Harsh Reality of Condo Rentals
Right now, the average downtown condo used as a rental is losing $700 to $800 per month. In some cases, landlords are covering deficits of $1,000 to $2,000 every month. Without adjustments to either market conditions or property usage, this financial pressure will only grow.
Renovating to create legal multi-unit setups, renting out furnished short-term suites, or increasing suite efficiency may be the best way to boost cash flow and stay afloat.
Downtown Toronto landlords are facing a tough balancing act—but with smart planning, careful screening, and a willingness to adapt to a shifting market, it’s possible to navigate through this challenging period.