Across the Greater Toronto Hamilton Area (GTHA), a growing number of condo projects that were cancelled amid the ongoing downturn aren’t simply disappearing; they’re being converted into purpose-built rental buildings instead. In 2025 alone, a record 28 active condo projects totalling 7,243 units were cancelled, according to Urbanation, more than double 2024’s total, and 8 of those projects (2,189 units) were converted directly to purpose-built rental, adding to the 1,434 units converted the year before. This can sound like more bad news for an already struggling condo market… But this conversion trend is actually one of the more constructive developments to come out of the downturn, and it’s quietly reshaping what gets built across Toronto for years to come.
Just How Many Cancelled Condos Are Becoming Rentals?
In 2025 alone, a record 28 active condo projects (7,243 units) were cancelled, more than double 2024’s 3,469 units and above the previous record of 3,598 set in 2018. With 8 of those projects (2,189 units) switching to purpose-built rentals. This pattern is accelerating into 2026: 963 cancelled condo units in a single recent quarter converted to rental, part of a net 7,360 condo units removed from the pipeline since the start of 2024. Separately, a broader count of roughly 61 projects representing over 27,000 units that had previously filed as condo applications have switched tracks to purpose-built rental, showing this isn’t a handful of isolated buildings, but a genuine market-wide shift. By mid-2026, purpose-built rental construction officially overtook condo construction in the GTHA for the first time in decades. Condo units under construction and rental units under construction were essentially tied in Q2 2026, and rental has since pulled ahead.
Why a Cancelled Condo Site Doesn’t Just Sit Empty
When a condo project fails to hit the presale threshold (typically 65-80% of units) lenders require before releasing construction financing, the deal collapses. But the developer still owns the land, still holds its zoning approvals, and has already sunk money into design and permitting. Converting a site to rental lets a developer preserve much of that upfront work rather than starting over from scratch on a new proposal. Not every cancelled project converts to a rental. Some sit on hold, some end up in receivership, and some are shelved indefinitely; conversion happens specifically on sites where the rental numbers can be made to work.
The Economics: Why Rentals Suddenly Work Where Condos Didn’t
In the traditional condo model, developers rely on presale revenue: selling most units upfront to fund construction. That model breaks down when buyer demand is this weak and resale prices in comparable buildings are already down 15-18% from the 2022 peak. In contrast, purpose-built rental doesn’t need presales at all. It just needs financing that pencils out against long-term rent roll, which is a fundamentally different, and currently more achievable, test to pass. For roughly 25 years, rental construction was the less-favoured option for developers, largely because of tax and financing rules that made condos the more profitable build.
The Government Incentives Making the Math Work
- The federal government removed GST on new purpose-built rental construction starting in September 2023, with Ontario matching the provincial portion, a change that previously added a real cost condos didn’t carry in the same way
- The Purpose-Built Rental Housing Rebate offers a 100% rebate on GST/HST tied to constructing, buying, or converting a building into purpose-built rental, worth up to roughly $35,000 per unit for projects substantially completed before 2029
- CMHC’s MLI Select program offers qualifying rental projects up to 95% loan-to-cost financing and amortizations of up to 50 years, which lowers the minimum rent a project needs to charge to service its construction loan
- Some municipalities, including Toronto, have also reduced development charges on rental projects to further improve the numbers
These incentives didn’t invent the trend on their own, but layered on top of a stalled condo market, they’ve tipped enough projects’ math from ‘doesn’t work’ to ‘works’.
What This Means If You’re Looking to Rent in the GTA
Near term, this conversion wave is adding to an already elevated rental construction pipeline. Purpose-built rental starts rose 24% year-over-year to a multi-decade high in 2025, while condo starts fell 63% to a multi-decade low. Toronto’s purpose-built rental vacancy rate has moved up to roughly 3.0% in 2025 from near-zero levels in prior years, meaning more genuine choice for renters and somewhat softer conditions in the short term. Rising vacancy here reads as a normalization from an extreme low, not evidence of a broadly oversupplied rental market. Much of today’s building pipeline still needs to be completed over the next year or two; the more meaningful test of supply comes after the window closes.
What This Means If You’re a Condo Buyer or Investor
Expect fewer new condo project launches going forward, especially outside the luxury or boutique segment, since much of what would have launched has either been shelved or converted to rental. For investors specifically, the underlying return model available in this market is shifting. From the short-term presale-and-assignment approach toward a longer-horizon rental income model, which suits a different investor profile and time horizon. Longer-term supply implication: today’s cancellations and conversions mean fewer condo completions in the 2027-2029 window, which several economists flag as a risk for renewed tightness once the current wave of completions is absorbed
Is This a Temporary Swap or a Lasting Shift?
As of mid-2026, purpose-built rental units under construction had already overtaken condo units under construction in the GTHA for the first time in decades. Economists note this rental wave, even at record levels, likely won’t fully replace the volume of housing the condo model used to deliver, since large condo towers typically house more units per site than most rental buildings financed under current programs. This is structural rather than temporary. The tax and financing framework that discouraged rental construction for roughly 25 years has substantially changed, and that’s expected to keep favouring rental development even once the condo market eventually recovers.
Conclusion
A meaningful share of Toronto’s cancelled condo projects aren’t dead. They’re being rebuilt as purpose-built rentals, and the pace of that conversion has been accelerating through 2025 and into 2026. This shift is easing near-term pressure on rental supply and vacancy, while also reshaping what the next few years of condo completions will look like. Federal and provincial incentives, the GST removal, the Purpose-Built Rental Housing Rebate, and CMHC’s MLI select financing are central reasons this conversion trend has become financially viable now, not just a byproduct of the downturn. This trend isn’t either purely good or purely bad news. The right takeaway depends on whether you’re renting, buying, or investing and on your own timeline. Here at Big City Realty, we’re well-versed in condo cancellations, purpose-built rental buildings, and new supply trends across the GTA and can help buyers, renters, and investors understand what this shift means for their specific plans.
FAQ
1. Why are so many condo projects being cancelled in Toronto?
Lack of buyer demand in pre-sales, which results in developers not being able to get financing for construction.
2. What happens to a condo project after it’s cancelled?
Some builders choose to hold, while others sell the site or convert it to a rental building.
3. Why are developers converting cancelled condos into rental buildings?
Current incentives allow builders to build rental buildings, which, from a financial standpoint, make sense for them.
4. Does the GST rebate apply to condo-to-rental conversions?
Yes, GST was removed on new purpose-built rental construction starting in September 2023. However, it’s developers who benefit from this, not end-users or investor buyers.
5. Will Toronto’s condo-to-rental shift affect future rents and home prices?
It will definitely add to the rental inventory, as we already see a softer rental market right now, but 2027-2029 home completions remain low, so it is yet to be seen if Toronto’s future rents and home prices will be affected by these new rental buildings.