The cost of renting an apartment in Toronto and Vancouver is falling. At the same time, construction of new housing – especially rental housing – has increased sharply for several years compared to pre-pandemic levels.

This news doesn’t mean that rents in the country’s two most expensive cities are suddenly cheap, or that there is a shortage of new housing in Canada. But it does show that a significant increase in supply can help bring prices down. The market is working.

The change is particularly striking in Toronto.

According to Urbanation and rentals.ca, the average rental cost for a one-bedroom apartment is $2,443, down 6 percent from a year ago. A two-bedroom apartment costs $3,193, down 5 percent. Meanwhile, in Toronto, 6,701 new rental units were scheduled to be completed in 2023, according to data from the Canada Mortgage and Housing Corp., and the city is on track to do about the same this year. The annual rate of new rentals is nearly three times what it was in the five years before the pandemic. In general, more new housing of all types was built in Toronto in the first seven months of this year — 30,116 — than in all of 2019 — 27,410.

The lesson is clear: new supply can make a difference in a housing market where rental and purchase prices have risen through the roof. But more supply is needed. Governments must continue to do everything in their power to accelerate the construction of new housing, from relaxing overly strict zoning regulations and cutting overly high development taxes at the local level to the federal government’s move last year to reduce VAT on new rental housing.

Resistance from existing homeowners remains a major obstacle to overcome, which is why higher density zoning is important so developers don’t have to fight long and expensive battles at city hall to get even small projects completed. Two recent examples from Vancouver and Toronto illustrate the ongoing problem.

Five years ago, a small five-storey apartment building was proposed in Vancouver’s Kitsilano, near downtown. 20 percent of the apartments were to be priced well below market. Local homeowners expressed extreme opposition in 2019: “It’s like breaking up the ghetto in Kitsilano.” City council eventually approved the project and the developer received a low-interest loan from the province. The apartments will finally be finished next month. Opponents now criticize the market-priced apartments as being too expensive. Things might have turned out differently if the project had not been dragged out by unnecessary delays as construction costs escalated during the pandemic.

In Toronto, a three-story, 11-unit development near a downtown subway station failed to advance past the planning stage because more than three dozen neighbors opposed it. The project required a so-called “minor variance” and was rejected twice by the Toronto Committee of Adjustment. The second “no” came last week. The city is sabotaging itself.

In recent years, Toronto and Vancouver have partially reformed the strict building restrictions on new construction, but this is far from enough. Old obstacles such as the Committee of Adjustment need to be completely revised or simply abolished.

In addition to the push to create more housing, the particular challenge is creating affordable housing. The strategy of governments in recent years, from Ottawa to provinces like British Columbia, has been to provide cheap loans to private developers who promise to build some of the cheaper housing. This minimizes the bill for taxpayers and, while it has helped get more housing built, it has not unleashed a flood of affordable housing. An analysis by Globe magazine this year showed that many of these apartments cost more than many renter households can afford.

The main policy pillar to promote affordable housing is to allow high density in cities like Vancouver and Toronto, but that option is not yet available. Among the ideas still on hold are numerous recommendations from a landmark Ontario housing report in early 2022, including allowing buildings up to 11 storeys along all public transit streets without special permits.

But the same report made clear that an affordable housing strategy must go deeper than relying on for-profit developers. That means money. One smart option is using public lands to build, a move Ottawa is already pursuing.

Opponents of new housing have claimed that increased supply would not slow prices. They are wrong. The decline in rents in Toronto while supply increases shows the central role that the housing market plays.