Our previous article compared the costs of renting versus owning your home in Toronto and found that renting offers the more affordable option. This post will try to better understand how affordable renting really is for Toronto and GTA households.
Last week Zoocasa published its article comparing the affordability of housing markets in Ontario. Their findings revealed that Richmond Hill was actually the least affordable market to buy a home in Ontario when comparing average home costs to median incomes (Toronto ranked second). We will take the same approach for GTA communities but compare average rental costs to local median incomes. The purpose of this review will be to understand what percentage of the median household’s income would be needed to pay rent in each municipality.
The following rental information comes from TREB’s Quarterly Rental Market Report: Second Quarter 2018. It is important to know that 79% of the second quarter’s rentals were in the city of Toronto. Meaning the averages for the GTA communities were frequently drawn from only a small number of leases. To manage this and review meaningful data, we are only using the larger GTA suburbs as examples.
Median Income and average rental rates for 1, 2 and 3 bedroom homes
|City||Median Income||1 Bedroom Rent||2 Bedroom Rent||3 Bedroom Rent|
Percentage of the monthly median income required for rental rates
|City||Monthly Median Income||% of Income for a 1 Bedroom||% of Income for a 2 Bedroom||% of Income for a 3 Bedroom|
Toronto clearly ranks as the least affordable rental market. From the information above, we see it does so for two reasons: the city has the lowest median household income while also having the highest rental price averages. Simply renting a one bedroom unit in Toronto requires nearly 40% of the median household’s income. The percentage breaks the 50% barrier for households needing or wanting a second bedroom and grows to almost 70% for three bedrooms.
In comparison, the remaining GTA municipalities have far higher median household incomes and significantly less expensive rents. The most expensive suburban rental average is for a three bedroom home in Mississauga, and that amount still only requires 40% of the city’s median household income.
We even see the rental gaps become larger between Toronto and its suburbs as the size of the home grows. Suburban one bedroom rents are 17% less expensive than Toronto; however, the price gap widens to 26% cheaper for two bedrooms and three bedroom homes are only two-thirds the price of Toronto.
The information from our analysis shows that while Toronto rents might be overwhelming for the city’s median household, suburban rents may offer an opportunity for their residents. The question going forward will be whether suburban rental prices stay low or if they begin to close the gap with Toronto?