Toronto’s rent crisis: Minimum wage would have to hit $40 an hour for workers to be able to afford to live here, report finds

Economic think tank report says the minimum wage needs to be $33.60 an hour for a worker to afford a one-bedroom apartment in Toronto — $40 an hour for a two-bedroom apartment

Ontario’s minimum wage would have to rise to $40 an hour for Toronto workers to comfortably afford a two-bedroom apartment and still have money for food and utilities, according to a report from the Canadian Centre for Policy Alternatives.

Nearly all Canadians putting in a 40-hour week at minimum wage are allocating more than 30 per cent of their monthly pre-tax income toward rent or mortgage costs — the marker of unaffordable housing — Tuesday’s report found.

And while Ontario has one of the highest hourly minimum wages in the country at $15.50, surpassed only by B.C. at $15.65, the climbing cost of housing in Toronto is eroding any gains made. On Oct. 1, 2022, Ontario’s minimum wage was bumped to $15.50 from $15 an hour, and it will rise to $16.55 in October.

But that’s still a far cry from what’s needed. At an average monthly rent of $2,572, a one-bedroom apartment in Toronto would require the minimum wage to be $33.60 for it to meet the affordability criteria, according to the report. For a two-bedroom apartment, that figure climbs to $40. That means the minimum wage would need to more than double for workers to comfortably afford rent in the city.

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Rent jumped by almost 16 per cent for Toronto condos and apartments in June compared to the same time last year, according to a report from Rentals.ca and real estate data firm Urbanation.

“Higher minimum wages don’t directly translate into better living standards. Hard-fought-for wage increases should improve the material conditions of working families,” said Ricardo Tranjan, Ontario political economist at the Canadian Centre for Policy Alternatives and co-author of the report.

Out of the 37 cities studied in the report, only three have affordable two-bedroom apartments for a minimum-wage earner, the report said — all in Quebec, where the minimum wage was $14.25 during the study in 2022. Minimum wage there is now $15.25. In that province, like many others, affordable housing is in decline while the cost of living is rising.

According to the report, only five cities in Canada have a single neighbourhood where the average two-bedroom apartment is affordable for a minimum-wage worker.

The top five cities with the most unaffordable rent for minimum-wage earners are all in Ontario and B.C., with Vancouver taking the top spot followed by Toronto, Kelowna, Victoria and Ottawa.

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As interest rates rise, higher mortgage costs for landlords are off-loaded to tenants who have seen rents increase in the past year, said David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives and the report’s co-author.

“This report doesn’t take into account data for late 2022 and 2023,” said Macdonald. “We haven’t taken into account the latest Bank of Canada rate hikes, which have pushed rents even higher in the last eight months. So the situation for renters is even worse than what’s captured in this report.”

While the lack of supply and increased demand is one reason for unaffordable housing, it’s not the entire reason, the report argues. The low supply of purpose-built rentals, which provide more varied unit sizes and security of tenure, is causing rents to skyrocket, as people have fewer affordable options to choose from. And some provinces have introduced legislation that vetoes rent control in certain circumstances.

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