Beefing up Toronto’s rental housing market is vital to cooling the country’s hottest housing market, according to a new CIBC report.

Benjamin Tal, deputy chief economist at CIBC Capital Markets, wrote in a report released Wednesday that Ottawa has a limited ability to help with cooling Toronto’s red-hot real estate market. Rather, Tal argues, policies need to target the Greater Toronto Area specifically.

“Toronto is an unaffordable city. We need to see the propensity to rent in this city rising and we need to see it now,” Tal said in an interview with BNN.

He added that more rental units are needed because Toronto’s new wave of renters –  including families with children –  can’t afford to buy.

“Basically what we are trying to tell you is that if you are 35 years old and have two kids and are renting, nothing is wrong with you – that should be the norm.”

In his report, Tal said that imposing a foreign buyers’ tax in Ontario similar to the British Columbia levy implemented in August would slow activity but it “should not be seen as the ultimate solution.”

Last week, Ontario Finance Minister Charles Sousa said that a foreign buyers’ tax was still on the table as an option to help cool the Toronto market. Sousa told BNN last year that the provincial government was “assessing the impacts” of B.C.’s 15 per cent levy on foreign buyers. 

“There is little doubt that the GTA’s rental market has never been hotter,” he wrote.

The average rent in the GTA rose almost 12 per cent in 2016 to a record high of $2.77 per square foot, according to CIBC.

“What’s adding to the price pressure is the changing composition of rental activity with a growing share of leases signed in the more expensive segment of the rental spectrum,” Tal wrote, adding that municipalities could provide incentives to bring more “purpose-built” rental inventory into the market.

He also noted that lower turnover rates in rental units signal that renting has become an accepted option for young families.