Are tiny condo units Toronto’s next big problem?

As sales and rental activity slow, developers pivot toward larger, more livable units

Are tiny condo units Toronto’s next big problem?

Toronto’s condo market is facing a new challenge: an oversupply of small units that are proving increasingly difficult to sell or rent as buyer preferences pivot toward larger, more livable spaces.

Bachelor and one-bedroom condos accounted for just 20% of sales in the last quarter of 2024, while larger units, such as one-bedrooms plus den, two-bedrooms, and two-bedrooms plus den, made up 72%, according to the Toronto Regional Real Estate Board. The difficulty in offloading smaller units reflects a broader market trend.

“Especially very small one-bedrooms, under 550 square feet — demand is very slow,” said Toronto real estate broker John Pasalis.

Rents for these units have also taken a hit. The average rent for a one-bedroom apartment in Toronto dropped 5.8% year-over-year, with other major cities seeing even sharper declines, according to Rentals.ca.

Market conditions have shifted as more end users, rather than investors, are driving demand. While micro-units were once attractive to investors looking for rental income or resale gains, those same units are now seen as too cramped for long-term living.

“Small is great from a price point perspective, but not if it's not functional, feasible or livable,” Christopher Wein, chief operations officer of Equiton Developments, said in an interview with CBC News. “The pendulum has to swing back.”

Wein noted that in some projects, developers are revisiting designs to prioritize space. Equiton’s project at 875 The Queensway, for example, will have 152 larger units instead of the previously approved 177, with each unit now roughly 10% bigger. The revised development is expected to be ready by 2027.

Structural and financial constraints

Modifying existing units is theoretically possible but rarely practical. Merging units requires costly structural changes and engineering work, especially in towers with concrete walls. Wein noted that such renovations are often so expensive and complicated that “we just shouldn’t bother.”

Even when structurally feasible, the economics rarely work out. Smaller units typically sell at a higher price per square foot, making it more expensive to buy and merge two units than to purchase a larger one outright.

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“The probability of two units going on the market at the exact same time that are suited to be merged… that will be virtually zero,” said Pasalis.

Helen Stopps, an architectural science professor at Toronto Metropolitan University, pointed out that any such renovations in completed buildings would require condo board approval—a process she described as “incredibly hard.”

Policy solutions

With structural and financial barriers limiting post-construction fixes, experts say that new policy approaches and design innovations are needed.

Stopps called for incentives like “density bonuses” or reduced development charges for buildings that offer larger, more livable units.

“Allowing developers to do whatever they want to maximize profits is how we ended up with so many tiny condos,” she said.

She also suggested that livability improvements could come from inside the units, such as modular furniture and movable walls, or outside them, via enhanced communal spaces and amenities.

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