Greater Toronto rental housing construction is at its lowest point in two years, says a new Urbanation report.

The number of purpose-built rentals under construction fell to 18,267 units in the third quarter of 2023, the lowest activity level since the second quarter of 2021, says the Toronto-based real estate research firm. The 2,938 units of rental-construction starts in the first three quarters of 2023 spelled a 54% decline compared to the same period in 2021.

“Compared to the multi-decade high of 19,994 rentals under construction in [the first quarter of 2022], when interest rates were just beginning to increase, the level of rental construction underway in the GTA has fallen by 9%,” said Urbanation in its report.

The decline was focused on the most affordable parts of the GTA, within the region covered by the 905 telephone area code. The 905 area’s 2,955 rental units under construction represented a 42% decline from the peak of 5,083 in the first quarter of 2022.

Shaun Hildebrand, Urbanation’s president, said the federal government’s decision to eliminate the G.S.T. on rental-housing developments, which prompted Ontario to lift its corresponding sales tax, will provide a “much needed shot in the arm” for new GTA rental construction.

“But it’s clear, given recent trends, that much more help is required to improve the economics of building rentals,” said Hildebrand in the report.