Greater Toronto’s rental shortage is now a distant memory, but the rents have yet to adjust. Urbanation data reveals the Greater Toronto and Hamilton Area (GTHA) has seen a sharp uptick in rental vacancies in Q1 2026. The sticker price of rents hasn’t moved much, but incentives are growing as landlords position the slump as temporary. That may be wishful thinking with record supply still in the pipeline.
Nearly 1 In 19 of Toronto’s Rental Apartments Sit Vacant
The Greater Toronto and Hamilton Area vacancy rate in post-2000 stabilized* rental buildings.
Source: Urbanation; Better Dwelling.
*Stabilized rental buildings are those that have moved past the initial lease-up and reached normal operating occupancy. Excluding buildings still in lease-up means this data understates the total supply competing for tenants.
Greater Toronto rental vacancies are surging in stabilized purpose-built rentals made after 2000. The latest data shows a vacancy rate of 5.4% in Q1 2026, 1.8 points above last year and double the lows of 2 years prior. The latest quarter marks the highest vacancy rate since the region’s lockdowns pushed it up to 6.3% in Q1 2021. Nearly 1 in 19 rental apartments across the region are now sitting empty, but wait—there’s more!
The availability rate reached a mind-boggling 8% in Q1 2026. This rate combines the vacancy with units where tenants have given notice to vacate. Nearly 1 in 12 units are looking for tenants across some very pricey markets. This suggests the market is even weaker than the vacancy rate alone implies.
“Vacancy increased as population inflows slowed and tenant turnover increased as renters took advantage of decreasing rents,” explains Urbanation. However, it’s worth noting that vacancies began to surge back with record population growth.
Greater Toronto Rents Are Barely Falling, But “Net Rents” Are
Growing vacancies haven’t turned into material price declines, yet. A problem that’s highlighted by more frequent rental reports. However, most (66%) of rental projects offered incentives in Q1 2026, up 4 points from last year—and more than double the 32% share two years ago. On average, face rents were reduced by 13% (-$379), from $2,904 to $2,525 after incentives. Annualized, that works out to $4,548 over 12 months, which is nothing to sneeze at.
The most common incentive in Q1 2026 was 2 months “free” rent, offered by 47% of projects, up 15 points from last year. It was followed by 1 month free offered by 42% of projects, down from 53% over the same period. The former means a 17% cut if spread over a 1 year least, the latter suggests lighter incentives were not enough.
Less common—but still widespread—were cash move-in bonuses (17% of projects), 1.5 months rent (6%), and 3 months rent (4%).
The reason incentives are preferred over rent reductions differs by project. However, two common reasons are base rents and valuation. When a tenant renews in a year, they use the base rent to determine the increase, not the effective rate. Keeping higher marginal rents helps to normalize higher costs and maintain “market rents.”
Market rents are a key factor for valuation, especially for highly leveraged builders. Net operating income (NOI) is typically used for valuation. This method reduces the cost of incentives from gross rental income, as it’s an expense. However, stabilized NOI has suddenly surged in popularity, which excludes non-recurring spending. This effectively dismisses the incentives as temporary costs, helping to preserve valuation. It’s a legitimate methodology, but similar to blanket appraisals, the timing is a little odd.
Greater Toronto Still Has A Lot More Rental Inventory Incoming
Despite the rising availability, the housing starts beast is already in motion. Purpose-built rental starts reached 3,674 units in Q1, up 12% year-over-year. The firm estimates 10,388 units started construction in the past year, a multi-decade high. They also expect 8,984 units to be delivered within the next 12 months, another record.
“Rental operators are grappling with a deluge of supply at the moment due to intense competition from the condo market and a surge in tenants moving to get a better deal,” said Shaun Hildebrand, President of Urbanation.
The data challenges the narrative of firming conditions from some firms. Marginal rents are more expensive than they were a few years ago, but effective rents are down 13%. Then there’s the multi-year high for vacancies, record high availability, and a pending flood of supply. Add to that a glut of investor-owned condos set to apply additional downward pressure. A problem further complicated by Toronto’s young adults fleeing to other provinces.
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