Canada’s rental housing market tightened last year amid surging demand that outpaced supply, even as many large cities added units, a new report from the Canada Mortgage and Housing Corporation (CMHC) has found.
The national vacancy rate for purpose-built rental apartments dropped to 1.9 per cent in 2022 from 3.1 per cent a year earlier, according to the CMHC’s Rental Market Report – the lowest level recorded since 2001.
The report said higher migration and rising home ownership costs drove up demand, while higher mortgage rates made it more challenging for renters to consider home ownership.
Affordability has been a challenge for renters, said CMHC chief economist Bob Dugan, particularly for people with lower incomes who have few options available within their price range.
“Lower vacancy rates and rising rents were a common theme across Canada in 2022,” Dugan said in the report.
“The current conditions reinforce the urgent need to accelerate housing supply and address supply gaps to improve housing affordability for Canadians.”
RECORD HIGH FOR RENT
Rent growth hit a new record high, the report said, with the annual rent for a two-bedroom apartment growing 5.6 per cent between 2021 and 2022.
Rents rose significantly more for two-bedroom units that turned over to new tenants, at 18.3 per cent compared with 2.9 per cent for apartments with no tenant turnover.
In Toronto, turnover units saw 29.1 per cent rent growth compared with 2.3 per cent for non-turnover units. This phenomenon created affordability challenges for renters trying to find new housing, the report said.
RENTAL SQUEEZE ACROSS CANADA
Students returning to campuses after years of pandemic remote learning contributed to the squeeze in several cities, the report noted, as well as more migration that picked up speed as pandemic restrictions eased.
New immigrants have a “high tendency to rent,” the report said, with most new immigrants landing in Ontario, B.C. and Québec and the Prairies seeing more interprovincial migration.
In Toronto, the primary rental apartment vacancy rate fell to 1.7 per cent in 2022 from 4.4 per cent the year before, as the economy and immigration trends saw fewer disruptions.
Montreal’s vacancy rate fell to 2.3 per cent from 3.7 per cent, and rent increases were particularly high, while in Vancouver, demand for rental housing increased faster than supply, bringing the vacancy rate to 0.9 per cent from 1.2 per cent in 2021.
Calgary’s vacancy rate dropped to 2.7 per cent from 5.1 per cent a year earlier, its lowest level since 2014 amid economic growth.
Condominiums, which “play a significant role in the supply of rental housing,” saw an average vacancy rate of 1.6 per cent across the country, representing essentially no change from 2021, and rents for two-bedrooms increased to $1,930 from $1,771.
“The tightness of both the rental condominium and purpose-built rental markets therefore had a common driver: the outpacing of strong supply growth by even stronger demand growth,” the report said.