The Type of Supply That Can Never Be Solved… and Why It’s the Best Place to Invest in Toronto Real Estate

Toronto’s real estate market is changing. Developers are increasingly shifting away from traditional condo development and toward purpose-built rental (PBR) projects. This trend has accelerated as high interest rates, construction cost inflation, and a prolonged drop in pre-construction condo sales have made it nearly impossible to get new towers off the ground. According to Urbanation, condo presales in Toronto are operating at just 20% of their 10-year averages as of Q2 2024. As a result, we’re heading into a period where condo supply will be severely limited—and even the shift to purpose-built rental will do little to address the real underlying shortage.

While purpose-built rentals are certainly part of the solution, they offer no real change in lifestyle. These are still vertical units in high-density towers, essentially “condos by another name.” But there’s another type of housing—low-density, house-style rentals in established neighbourhoods—that faces a much deeper, more permanent supply issue. It’s this supply imbalance that savvy investors are starting to recognize, especially those focused on Toronto multiplex conversions.

Why Multiplexes in Toronto Are Structurally Undersupplied

The number of single-family homes in the City of Toronto is finite—and shrinking. With every new mid-rise development, detached or semi-detached houses are being torn down and replaced by denser forms of housing. While that’s great for improving supply overall, it does nothing to increase the number of house-style rental units. You can’t replicate the location, charm, yard space, or neighbourhood character of these homes—and for renters and families looking to escape the condo lifestyle, they remain the most desirable option.

At the same time, demand for this kind of housing is quietly exploding. Families and long-term renters are tiring of high-rise living—waiting for elevators, sharing walls, and living without privacy or outdoor space. As affordability declines and the ownership dream slips further out of reach, more people are opting to rent for the long haul. In fact, from 2011 to 2021, rental households in the Greater Toronto Area grew more than three times faster than ownership households—25.6% compared to 7.7%.

Meanwhile, despite increasing government focus on rental housing, purpose-built rental supply continues to lag. While the City of Toronto has approved over 70,000 PBR units between 2018 and 2024, as of Q1 2025 there were only 21,866 units under construction—and just 731 units actually broke ground that quarter, representing a 60% decline year-over-year. That’s also 41% below the five-year average. On the surface, development activity appears strong—but delays, costs, and financing constraints mean that only a fraction of those projects are moving forward in a timely manner.

Why the Government Is Making It Easier Than Ever to Convert Single-Family Homes into Multiplexes

In response to the housing crisis, all levels of government have introduced sweeping changes to make it easier—and far more profitable—to convert single-family homes into multiplex rental housing. These changes have created one of the best environments for Toronto real estate investing in decades.

Here’s what’s changed:

• As-of-right zoning: The City of Toronto now allows multiplexes (up to 4 units) by default across all low-rise residential zones—no rezoning or Committee of Adjustment needed.

  
  

• Laneway and garden suite permissions: Secondary units in the rear yard, like laneway houses and garden suites, are also allowed by right in most areas, creating additional rental income potential.

  
  

• HST exemptions: Many multiplex conversions now qualify for partial or full HST relief, significantly improving project viability.

  
  

• Development charge waivers: Development charges—often tens or even hundreds of thousands of dollars—are now waived for many multiplex projects and new rental units, particularly those built through conversions or in garden/laneway formats.

  
  

• The CMHC MLI Select program: Perhaps the biggest incentive of all, the CMHC MLI Select financing program offers investors up to 95% loan-to-cost financing, 50-year amortizations, and significantly reduced insurance premiums for energy-efficient, accessible, and affordable rental housing. If you’re creating new rental units through a Toronto multiplex conversion, this is the most attractive financing program in a generation.

  
  

Taken together, these changes mean that investors can now buy a single-family home in Toronto, convert it into 3–4 rental units, and finance the entire project through CMHC-backed, low-cost debt—all without facing the same financial and regulatory barriers that existed just a few years ago.

Why Toronto Multiplex Investing Is Future-Proof

From a long-term investment perspective, multiplex conversions offer something other asset classes can’t: permanent scarcity. While condo supply may ebb and flow, and purpose-built rental towers will eventually fill the skyline, the opportunity to own a low-rise multiplex in a family-friendly Toronto neighbourhood is both finite and disappearing.

Every time a house is demolished and replaced with a mid-rise building, the supply of these properties gets smaller. Even with new zoning allowances, not every house will be converted—and many won’t qualify for laneway or garden suites due to lot constraints. That means the total number of viable multiplex investments is structurally capped.

At the same time, demand continues to grow. Families want space. Long-term renters want stability. And the ownership rate is declining. CMHC data confirms that investor-owned rental units now represent over 56% of Toronto condos, and play a central role in urban housing, especially in markets where affordability is a major barrier to entry.

Toronto multiplexes offer a unique value proposition: they combine house-style living with multi-unit income, long-term rent growth, high land value, and access to government-backed financing. Unlike larger developments that are vulnerable to cost escalations, delays, or tenant turnover cycles, small multiplexes can offer consistent, community-based rental housing in a form that renters genuinely want.

Final Thoughts: Invest Where the Supply Can’t Grow

In Toronto real estate, not all supply is created equal. Condo towers will be built again. Purpose-built rental applications will eventually turn into completions. But the number of low-density, family-friendly homes with multiple units in established neighbourhoods? That number is only going down.

This is why investing in Toronto multiplex conversions is one of the most compelling strategies available today. You’re buying into a market where demand is growing, supply is shrinking, financing is favourable, and government policy is finally aligned with investor interests.

If you’re serious about Toronto real estate investing, now is the time to look at small multiplexes. Not just because they cash flow—but because they’re becoming the most irreplaceable asset in the entire housing ecosystem.