The City of Toronto has made progress in its housing efforts with its Purpose-Built Rental Housing Incentives stream, a program aimed at expanding the city’s rental housing supply. This initiative forms part of the city’s larger commitment to enable the construction of 20,000 rental homes by the end of 2026, addressing critical housing shortages.
The Purpose-Built Rental Housing Incentives stream is a component of Toronto’s Rental Housing Supply Program, which supports the development of various new rental homes, including rent-geared-to-income, affordable rental, rent-controlled, and purpose-built rental homes. This stream offers financial incentives to developers to encourage the construction of purpose-built rental units, thereby increasing the city’s rental housing supply.
Program Goals and Approved Projects
The first phase of the program has resulted in the approval of 7,156 net new rental homes across 17 projects in 12 wards. These include 6,109 net new purpose-built rental units and 1,047 net new affordable rentals. The city has set a requirement that at least 20% of all units must meet its income-based definition of affordability, ensuring lower rents for qualifying tenants. These affordability commitments are guaranteed for at least 40 years, with the potential to extend up to 99 years.
Financial Incentives for Developers
Developers participating in the program are offered a range of financial incentives to make their projects more viable. The most notable benefit for purpose-built rental homes is an indefinite deferral of development charges on the municipal portion. Projects including affordable rental units are further incentivized with exemptions from development charges, community benefit charges, parkland dedication fees, and property taxes during the affordability period.
Additionally, eligible projects may qualify for up to $260,000 in capital funding per affordable or rent-geared-to-income unit. A new Multi-Residential Property Tax Subclass, expected to be confirmed in the 2025 budget, will also reduce municipal property tax rates for new multi-residential buildings by 15 percent.
Eligibility and Prioritization
Both private and non-profit housing organizations are eligible to apply for the program. However, the city has prioritized projects based on specific criteria to ensure swift progress and alignment with its goals. Priority was given to developments that were financially ready, had secured approvals, or demonstrated an ability to begin construction in the near term. Projects led by organizations with strong financing histories, including those designated as frequent builders by the Canada Mortgage and Housing Corporation (CMHC), were also favoured.
All approved developments must commit to maintaining their purpose-built rental and affordable housing status over the long term. This requirement ensures that these homes remain available as rentals, contributing to the stability of the city’s housing supply.
Sector Response and Future Potential
The response to the first phase of the program has been overwhelmingly positive, with 75 applications submitted representing over 32,600 proposed rental units, including 7,400 affordable homes. Although only 17 projects were approved initially, the city is optimistic about advancing additional applications in the program’s second phase.
The second phase of the program could unlock up to 24,450 additional rental units if provincial funding through the Build More Homes Rebate becomes available. This rebate would offset development charges and a significant portion of property taxes for eligible projects, making them more financially feasible for developers.
The Purpose-Built Rental Housing Incentives stream presents a new opportunity for investors and developers to participate in Toronto’s growing rental market. The combination of deferred development charges, property tax reductions, and capital funding aims to lower the financial barriers to building new rental housing.
