This article is written by Natalka Falcomer, VP Corporate Development, Chestnut Park Real Estate Limited, Brokerage
Toronto has a commanding presence on almost every “top 10” list found on the internet or in print. From the “best place to live” to “top financial centres”, Toronto ranks near the top. Where we don’t command a presence, however, is on the list of the “world’s top 10 most expensive cities to rent”. Rather, rent is still a bargain in comparison to other global financial hubs. Let’s take, for example, New York. A 2016 study confirmed something we all know to be true: New Yorkers spend an unconscionable amount of their income on rent – 65.2% to be precise. And this alarming fact barely made America’s evening news, if at all. Not so in Canada.
Alarm bells rang all over Canadian media as the B.C. Non-Profit Housing Association’s 2018 Canadian Rental Housing Index report announced that Torontonians, on average, spend slightly more than 30% of their income on rent. The reason for the concern is because of an outdated heuristic called the “30% rule”. This rule, adopted by public policy makers and financial gurus as if it were gospel truth, swear that you should budget a maximum of 30% of your income for housing costs or else. This rule, while helpful for personal budgets, does not have much merit. Its roots stem from American 1969 public housing regulations, which capped public housing rent at 25% of a tenant’s income. The 25% cap did not come from a controlled study or hard number crunching. Rather it was based on what consumers were spending at the time of the study and not what they were willing to spend in order to gain access to better schools, restaurants, commutes or lifestyle.
Simply put, the claim that Toronto’s rental rates are “too high” is not entirely accurate if we look at the Toronto market from a global lens and if we call into question the veracity of the “30% rule”. Quite the contrary. We’re an excellent city by many measures and we’ve yet to experience the stunning rent rates paid by New Yorkers. I’m not denying that rental rates are increasing. Rather, I’m affirming that such increases are a natural progression that a “best of” city will experience if it has ever-increasing demand and ever-decreasing lack of supply. People are willing to allocate more of their income to live in a city that has strong employment in well-paying jobs, excellent restaurants and a thriving community. For those who want to see rental rates cool, the answer is simple: encourage government policies that support intensification, infill building and purpose-built rental projects. Otherwise, copy the city’s unofficial spokesperson, Drake (potentially another factor in Toronto’s sudden popularity), and be proud that Toronto “started from the bottom, now we’re here”.
Source: Chestnut Park Blog