Condo construction in Toronto has collapsed while purpose-built rental construction has surged by nearly 900% over the past decade. This isn't driven by organic demand, it's the result of government incentives and financing structures that heavily favor rentals over ownership housing. Since 2024, dozens of condo projects have been cancelled or converted to rentals, permanently removing thousands of ownership units from the market. While rental supply increases, the pathway to homeownership is becoming harder to access for Toronto residents.
Purpose-built rental construction is being fueled by federal programs like CMHC's MLI Select, a mortgage loan insurance program that enables developers to obtain up to 95% loan-to-cost financing, 40-year amortizations, and more favorable interest rates from private lenders. These are benefits that condo developers don't receive. According to CMHC, 84% of rental developers in the GTA now rely on financing enabled by CMHC insurance. Developers also receive GST savings, reduced development charges, and decades-long property tax discounts.
At the same time, condo construction has fallen to levels not seen since the late 1990s. Since 2024 alone, nine active condo presales have been cancelled and relaunched as rentals, and over sixty additional projects in planning switched from condo to rental before ever launching. Major conversions like Sugar Wharf Phase 2 eliminated over 1,000 ownership units. Once a project becomes a rental, it stays that way permanently. The financing structures, legal requirements, and tenant protections make conversion back to ownership nearly impossible.
Institutional investors like pension funds and REITs prefer the stable, long-term income that rental buildings provide, further accelerating the shift. The result: ownership supply is shrinking while rental supply rapidly expands, creating an imbalanced market that doesn't reflect what many residents actually want and need.
This shift is fundamentally reshaping who can build wealth and stability in Toronto. When ownership housing disappears, so does the primary way most Canadians build long-term financial security. The immediate impact is already visible: CIBC's deputy chief economist warns that once the current surplus of unsold condos is absorbed by late 2027, prices will climb again due to lack of supply.
For renters, the short-term benefits (slight vacancy increases, rental incentives, more choice) may feel positive, but they come at a cost. When the market becomes dominated by a few large institutional landlords, tenants lose bargaining power. And as rental housing becomes concentrated in fewer hands, the government gains more leverage to implement sweeping policy changes. When you can negotiate with a handful of major players instead of thousands of individual landlords, it becomes much easier to push through regulations that may not serve tenants' interests.
The housing being built also doesn't match what people need. Government incentives favor high-density, low-cost units, resulting in a flood of small one-bedrooms and micro-units. When residents want to start families or need more space, they're stuck. There's no missing-middle housing, and almost no new family-sized condos are being produced. This forces an impossible choice: live in Toronto or leave and have the space your family needs.
Toronto's per-capita housing starts have fallen to their lowest point since 1996. If land continues to be funneled into permanent rental tenure and ownership projects keep being cancelled, the city isn't just failing to fix affordability. It's determining who gets to build a future here and who gets pushed out.
This isn't a housing strategy. It's a slow-motion elimination of homeownership as an option for most people. The government has essentially picked winners and losers by designing a system that makes it nearly impossible to build condos while handing rental developers a blank check.
And let's be clear about what's actually happening with CMHC-insured financing. Hazelview secured one of the largest MLI Select-insured financings ever for over 850 rental units at Bloor and Dufferin. Out of those 850+ units, only 56 are affordable. They qualified for massive CMHC-insured financing not by providing affordable housing, but by maxing out energy efficiency and accessibility points. They're playing by the rules, but the rules are broken. When a program designed to support affordability doesn't actually require affordability, it's not serving the public. It's serving developers.
We're also creating a feedback loop that will be nearly impossible to escape. Condo construction slows; the government responds by propping up rentals; developers switch to rentals because that's where the money is; ownership supply shrinks; condo prices rise; more people are forced to rent; and the government points to rising rental demand to justify building even more rentals. The cycle feeds itself.
Rentals are important. But they can't replace ownership housing. And once land is locked into rental tenure, it's gone. You can't just convert it back when you realize you've overcorrected. We're already seeing cracks in demand: vacancies are climbing to record highs, and nearly two-thirds of new rental buildings are offering incentives just to fill units. That tells you supply is outpacing demand, yet we keep building more.
If we don't start building condos again (not in two years, but now), affordability will never improve. You can't fix housing affordability by eliminating the type of housing people are trying to afford. And if the only option left is renting from a handful of massive landlords, we're not solving the housing crisis. We're just deciding who profits from it.
