Toronto

Over Half of Toronto Can’t Afford To Rent An Average 1 Bedroom By Themselves

Young person looking to move to Toronto? Better line up a professional gig first, or expect to bunk up. Canadian Centre for Policy Alternatives (CCPA) crunched the numbers to find the wage needed to rent in Greater Toronto. Digging into the numbers, we can see how unsustainably high prices have become. The average one-bedroom is […]

Young person looking to move to Toronto? Better line up a professional gig first, or expect to bunk up. Canadian Centre for Policy Alternatives (CCPA) crunched the numbers to find the wage needed to rent in Greater Toronto. Digging into the numbers, we can see how unsustainably high prices have become. The average one-bedroom is unaffordable for over half of the city – even in distant suburbs.

Housing Affordability

Just because you can make the payments and not go into arrears, does not mean your housing is affordable. The term “affordable” is thrown around a lot, but there’s an actual definition used by the government. For housing to be affordable, shelter expenses need to represent less than 30% of gross (a.k.a. pre-tax) income. Shelter expenses include, but are not limited to, rent, mortgage payments, utilities, taxes. This is the definition used by the CCPA to determine “affordable.”

Living in an unaffordable situation isn’t necessarily defined as poverty either. In Canada, the low-income measure (LIM) is often used to define poverty. LIM considers a household in poverty if their income is below 50% of the median Canadian household income. Even if you spend all of your income on rent, taxes, transport, and not enough food – you’re not in “poverty.” Even by the restrictive measure, over 4.9 million Canadians that fit this definition. That’s about one in seven people. Basically, not being able to put food on the table after expenses is not poverty by many measures.

The Average One-Bedroom Requires An Income of Over $27/HR

The average one-bedroom rental requires quite a bit of cash in Greater Toronto. To afford a one-bedroom rental apartment in the GTA, you would have to earn $27.74/hr, according to the CCPA study. This works out to an income of $57,700 per year – not exactly chump change. Remember, that’s only for a one-bedroom rental, and we’re including far flung suburbs. Don’t even dare think of trying to start a family on that.

Make less than $20 per hour, or $41,600 per year? There’s only four neighborhoods where an average one-bedroom apartment is affordable. Malton has the cheapest one-bedroom average, requiring a wage of $19.11 per hour. Ajax Pickering followed with a required income $19.33 per hour. Rexdale-Kipling comes in fourth, with a required income of $19.47 per hour. Long Branch is the last neighborhood you can squeeze in for under $20, requiring an income of $19.66 per hour. If you’re not from Toronto, only two of those neighbourhoods are actually in the City of Toronto.

Got a little extra cash? The city’s most expensive average one-bedroom prices are all in downtown Toronto. The Bay Street corridor requires a wage of $45.64 per hour for an average rental – the most expensive in the city. Waterfront Communities (including the Island) follow with an average one-bedroom requiring $41.74 per hour in wage. Moore Park is third most expensive – with the average one-bedroom needing $41.08 per hour. Yes, you need an income of at least $85,447 to rent an average one-bedroom these three neighborhoods.

Over Half of Toronto Couldn’t Afford An Average One-Bedroom

More surprising is how few individuals can afford a one-bedroom on their own. The median individual income in Greater Toronto was just $33,600 per year in 2017. Let’s assume generous growth of 5% compounded annually (okay, very generous). The median income would still only be $37,044 per year (~$17.81 per hour). Looping back, that’s not even enough to rent the average one-bedroom in Malton. Half of Greater Toronto cannot afford to rent the average one-bedroom by themselves.

The unsustainable gap between income and rent is going to have consequences. Buyers in the GTA are already delaying their first home buy until their mid-thirties. Further squeezing of wages through rent would mean more pressure on their stability. The further income lost towards shelter has to come from somewhere. The most obvious would be consumption in the local economy, and diversifying investments.

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14 Comments

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  • Reply
    Heather Mills 5 months ago

    Great study.

    Would be interested to know how this impacts quality of life, co-habitation. One of the greatest equalizations for womens rights was being able to earn their own money, and the ability to leave a relationship. If people are bound by wage issues, this can reverse a lot of that independence.

    • Reply
      Ethan Wu 5 months ago

      Yes, and the impact on entrepreneurship and career advancement. You take fewer chances if you’ll be homeless if you screw up. Unicorn startups are founded in garages and dorms – not usually $3,000/month bachelor condos. This is what killed local innovation in NYC.

  • Reply
    Ethan Wu 5 months ago

    Additional insight, and I hope I’m not encroaching on BD territory here:

    These rental numbers will be inflated by the marginal rental rate. A good portion of the population is gridlocked in their units, and won’t be moving until rents regress or incomes inflate (through excess credit print). Basically, most people that rent are well under these numbers, so this pop in rates can come down very quickly and not be statistically recognized do to distribution.

    This happened in the 90s. Officially, rents dropped a little bit. Unofficially, there’s a lot of anecdotal evidence that shows up to a 30% reduction if you go through some old advertisements in the classified sections.

  • Reply
    Ahmed 5 months ago

    At what point do people realize a one-bedroom rental rate is pretty close to a whole detached house rental rate? People are insane.

  • Reply
    GTA Landlord 5 months ago

    This is with 40% of condo investors taking negative cap rates. Basically, they’re subsidizing rents.

    Someone is going to take a steep loss, and you can only squeeze renters so much.

    • Reply
      MH 5 months ago

      The thing is that if you need to launder some dirty money then that’s OK. Fifty cents on the dollar with the government supported quality guarantee? I suspect there will be a lot of takers from allover the world.

  • Reply
    Kurt 5 months ago

    Renting rooms and basements will become the norm if it not already. People who own already, will eventually at some point not be able keep up so they rent out a room or basement and non-owners can’t afford these one bedrooms, so they rent out a room or basement. The next step of the government is to relax the rules surrounding rooms and basements.

  • Reply
    Rick Abrams 5 months ago

    When your income goes to rent and not to pay off a mortgage, your dwelling is unaffordable. Although the desire to own a home is rapidly being treated as some sort of economical crime, the reality is that when you rent, you are not accumulating wealth. Rather you are giving away your wealth to the bankers.

    If rents were extremely low so that people could accumulate a downpayment for a home rapidly or could put away a significant portion of their income into other investments for the future, then high rents would not be a form of “theft.” The reality which people refuse to face is that Smart Planning and the New Urbanism is designed to create a future generation of poverty stricken retirees who have no income independent of the government dole.

    Let’s put it more simply: Sprawl with individual home ownership increases wealth among the general population while densification of core areas increases the wealth of the 1% while the rest of us become poorer.

    • Reply
      Millennial Whinger 5 months ago

      Assuming housing prices never decrease and a renter is spending all income on rent and unable to invest at all…

    • Reply
      John 5 months ago

      The first 5 to 10 years of homeownership you’re not accumulating wealth. You’re giving it all to bankers.

      Renting I am accumulating a lot of wealth. Probably because I dont travel and I dont drive a Mercedes.

      Lay off the legal weed bro.

    • Reply
      JB 5 months ago

      I live in a recently renovated building (moved in about 3 years ago) in the downtown core paying about $1350-1400/month for a 1 bedroom. To buy the same quality of living I experience now, I’d be shelling out about double before maintenance/property tax.

      Granted, the same unit is about $2000 now (rent control in effect), but I am/have been receiving a greater return investing my savings ($1500+ per month) in the market than I would have if I had bought a house. Canadian real estate is a scam.

      Totally agree with your last statement but not all of us renters are making the wrong choices. Buying a house/condo would be insanity in my position.

      • Reply
        Meridith 5 months ago

        When interest rates go negative (like they did in 2015), and stay there for awhile, the barrier to buying a home is virtually eliminated. Owning a house becomes a crowded trade, not an investment everyone should make.

  • Reply
    Joseph 5 months ago

    Stress Test number just got lowered from 5.34 to 5.19.

    Unreal.

  • Reply
    Paul H 5 months ago

    Interesting Article Daniel. I have two questions:

    1. How does this compare with other international cities? Toronto is ranked the 11th most affordable city, so more affordable than cities like Vancouver, Seattle, New York. Los Angeles, Boston, Miami, etc.

    2. What is the distribution on income in the city? My hypothesis is that Toronto is affordable for the 30-40% of income makers, and that the continued printing of money by governments will continue to put cheap debt (which in turn gets invested in housing) in the hands of the wealthy but leaves the “working poor” (it’s crazy this is even a term) behind. And I guess my fear is that this will not stop any time soon. Toronto is the number one city people want to move to, Ontario is creating jobs for now and housing costs will continue to rise and the rich will get richer! Hence the first question, as I read articles about New York they have been struggling with this a lot longer than we have and have yet to find a solution!

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