Canada's average rent saw record growth in 2023 as demand outpaced supply, while the rental vacancy rate reached a record low of 1.5 per cent, a new report shows.
Released Wednesday, the from the Canada Mortgage and Housing Corp. (CMHC) said the national vacancy rate for purpose-built rental units last year was the lowest since 1988, when the organization began recording the metric. The federal housing agency uses purpose-built rentals as its representative sample.
By comparison, the vacancy rate for those units was 1.9 per cent in 2022, which at the time was the lowest rate seen in more than two decades.
The national vacancy rate reflects the percentage of unoccupied and available residential units across the country. A lower rate typically means greater competition among renters and a higher incentive for unit owners to raise their rates.
For two-bedroom condominiums up for rent, the average vacancy rate fell from 1.6 per cent in 2022 to 0.9 per cent in 2023.
“While the recent revival of rental construction has been encouraging, it was evidently not enough to ease the market and curb steep rent increases,†the report reads.
Rent prices soared in most markets, consistent with the observed decline in vacancy rates.
Growth in the average rent for two-bedroom purpose built apartments accelerated “sharply†to a record eight per cent in 2023, in a jump that outpaced both inflation (4.7 per cent) and wage growth (five per cent).
That left renters paying, on average, $1,359 per month for those units last year.
That growth figure was up from the 5.6 per cent rent growth recorded in 2022 and well above the 2.8 per cent growth documented from 1990-2022.
Meanwhile, the average rent for two-bedroom condos was $2,049 in 2023, up from $1,929 from the previous year. This represented a six per cent increase.
Lower-income renters faced significant competition in their hunts for affordable rates. In some cities, finding affordable units was next to impossible.
For a rate to be considered affordable, it should cost less than 30 per cent of a renter household’s before-tax income,CMHC said.
In Vancouver, Ottawa and Toronto, the proportion of rental units considered affordable for the bottom 20 per cent of earners was “statistically zero,†the federal housing agency said.
In Edmonton, those units made up 12.7 per cent of total spaces. In Calgary, 3.1 per cent of apartments were considered affordable for low-income renters.
In Montreal, 18.1 per cent of apartments were available at affordable rates for low-income earners. However, many of them were either bachelor or one-bedroom apartments, which could be unfit for families.
As for vacancy rates, Calgary and Edmonton saw steep declines. Their vacancy rates fell from 2.7 in 2022 to 1.4 per cent in 2023, and 4.3 to 2.4 per cent over the same period, respectively.
Vancouver remained the tightest rental market in the country, with a vacancy rate of 0.9 per cent, unchanged from 2022. Ottawa’s vacancy rate also remained the same as the 2022 level, sitting at 2.1 per cent.
In Toronto, Canada’s largest city, the vacancy rate dropped from 1.6 to 1.4 per cent. Meanwhile, in Montreal, the rate fell from two per cent to 1.5 per cent.
Vancouver remains the most expensive rental market, with $2,181 being the average monthly rent for a two-bedroom purpose-built apartment, followed by Toronto, where the average rent for those units was $1,961 in 2023.
The least expensive apartments are concentrated in Quebec, exemplified by Montreal’s relatively low 2023 average two-bedroom rent of $1,096.
Immigration led to increased demand for rental units in most large centres, while high interprovincial migration contributed in communities in Alberta, the report notes.
With net immigration to Canada trending sharply higher since 2020, there was increased pressure on the rental markets of Toronto, Montreal and Vancouver, cities that are also the destination for many international students.
The federal government recently announced a two-year limit on foreign student enrolment, cutting the number of new permits by 35 per cent this year.
As CTV News reported, observers say the new cap on international students admitted to the country will cool the high demand for rental units and slow the rate of rent hikes, but it won't necessarily be a big factor in solving the housing affordability crisis.
In Edmonton and Calgary, the influx of interprovincial migrants — people who move from one province to another — led to increased demand.
The report suggests people are likely drawn to Alberta — at least partly — by the relatively strong employment growth in Calgary and Edmonton as well as lower home prices relative to Toronto and Vancouver.
Employment growth among young Canadians and the low affordability of homeownership also led to increased demand in the rental market overall.
With files from The Canadian Press
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