Scarborough and North York Developers Shift Condo Projects to Rentals Amid Construction Costs
It made more financial sense as a rental,
Matt Young, president and CEO of Republic Developments, told CTV News. That financial calculation is driving a pivot across the Toronto housing market, where developers are switching to rental housing.
Young originally planned to sell units in the first phase of a major housing development along St. Clair Avenue East in Scarborough as condominiums. Instead, those homes will enter the rental market. He points to a persistent gap between what buyers can afford and what it costs to build.
Stalled Condo Sales and Financing Hurdles
Condo developers rely on pre-construction sales to secure financing. Simeon Papailias, a real estate agent with Royal LePage Signature Realty, says weak demand from investors means projects cannot hit the pre-sales thresholds required to secure financing.
Unless they reduce the cost to build where prices can get back in line for profit for the development community, you’re not going to have any projects starting,
Papailias told CTV News. He notes that without sufficient pre-sales, projects can be cancelled or switched to rentals.
Buyers are also pulling back from the pre-construction market. Davelle Morrison, a broker with Bosley Real Estate in Toronto, reports that her clients are wary of purchasing homes before they are built over concerns about project completion and developer stability. For buyers who are ready to act, Morrison says resale condos offer a cheaper, visible alternative.
Government Incentives and Flat Housing Starts
The market shift toward rentals coincides with federal and provincial intervention aimed at boosting supply. Data published by the Canada Mortgage and Housing Corporation (CMHC) indicates that the six-month housing starts trajectory remained nearly level in September, edging up 0.6 per cent compared to August. Simultaneously, the CMHC documented 143,929 residential properties featuring approved building permits where work had not yet begun across Canadian urban areas with at least 50,000 residents, marking a 1.1 per cent rise from August.
To spur construction, governments have rolled out targeted financial programs. Ottawa is backing developers through the Apartment Construction Loan Program alongside full federal sales-tax rebates for qualifying new rentals. In June, the Ontario government committed up to $178 million through the Building Ontario Fund to help advance the first phase of the Scarborough Junction development, which is expected to deliver approximately 1,700 rental homes.
Targeting the Family Rental Market in North York and Scarborough
Smaller developers are also adapting to the rental demand. Amir Ismailzadeh is finishing a five-unit property in North York, focusing on rentals.
Many households with well-paying jobs still struggle to save enough for a down payment. Ismailzadeh told CTV News that his family-oriented units in North York provide an option for them to rent until they do buy. Three of those five units are already leased, with five more in the pipeline.
Young anticipates that the condo market will recover eventually, but he argues that the immediate surge in rental construction serves a vital function. He notes that building more rentals will help stabilize rent prices while the condo market works through its current backlog.
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