New CMHC Report: Record Low Vacancy Rates And Higher Average Rent Prices In 2023
In 2023, the rental market faced an unprecedented challenge as vacancy rates dropped to a historic low of 1.5%, particularly in major cities like Toronto, Montreal, Calgary and Edmonton.
According to the CMHC, the surge in demand, fueled by employment growth and housing affordability issues, has created a significant imbalance between supply and demand.
This imbalance is particularly felt by lower-income renters, as cities such as Vancouver, Ottawa, and Toronto struggle to provide affordable housing options.
Let’s look into Canada’s rental landscape, how it may affect your ability to find affordable housing and what you can do.
Rental Supply Has Hit A Record Low In Canada
The overall vacancy rate for purpose-built rentals (apartments) in Canada hit a record low of 1.5%. With vacancy rates for condominium apartments falling even lower at 0.9%.
The vacancy rate is a metric used to measure the difference between supply and demand. In Canada, the CMHC views 3% as a healthy rate.
Though there is a marked increase in rental units, it hasn’t been enough to meet demands. Leading to an increase in competition and decreased affordability. With fewer rental units in the market, rent prices have skyrocketed.
Low Rental Vacancy Is Increasing Rent Prices
In 2023, rent prices for a two-bedroom apartment in Canada saw an increase of 8%, with an average monthly rent of $1,359. Similarly, a two-bedroom condominium apartment saw an increase in rent of 6% ($1,929 to $2,049).
This surge outpaced both inflation (4.7%) and wage growth (5%). However, to be considered affordable, rent should ideally be less than 30% of a renter’s monthly income, as per the CMHC.
Unfortunately, lower-income renters faced fierce competition in their quest for affordable housing, especially in cities like Vancouver, Ottawa and Toronto, where the portion of affordable units for the bottom 20% of earners was virtually nonexistent. In Edmonton, 12.7% of units were considered affordable, while only 3.1% in Calgary.
In Montreal, the rate was 18.1%; however, a significant portion of these units consisted of bachelor or one-bedroom apartments. Presenting a challenge for families and individuals engaged in co-living arrangements. Considering a substantial percentage of renters, specifically those aged 15-23, are more inclined to seek roommates to alleviate the cost of living.
What’s Causing Canada’s Rental Affordability Crisis?
There are several factors that have contributed to the rental affordability crisis. Some of the biggest drivers were:
- Percentage of Affordable Units Available – The percentage of affordable units (where rent costs not more than 30% of your income) for households with the lowest incomes in a city has declined. The availability of such units is non-existent in major cities like Vancouver, Ottawa, and Toronto.
- Increased Demand – Several factors have caused demand to outpace supply including employment growth, demographic growth, and unaffordable housing.
- Population Growth – In urban centers where demand outpaces supply, cities experience robust population increases fueled by factors like employment opportunities. This surge in population further tightens the rental market, making it increasingly challenging for individuals to secure affordable housing options.
- Decreased turnover – As households are less willing or able to leave their rental units, the overall vacancy rates drop, elevating rental costs. This trend is linked to the growing difficulty of achieving homeownership, making it harder for new tenants to enter the market or find alternative housing options.
What Does This Mean For Renters?
With fewer options available, many Canadians are likely to be stuck with units that are out of budget. With a larger portion of their income going toward rent payments, Canadians will have a harder time saving for retirement, a house, and other major life expenses.
If you’re struggling to make your rent payments, look into rent assistance programs. Many provinces offer programs to help make rent affordable, including:
Alberta – If eligible, Albertans can receive financial aid from the government to help pay rent. The amount you receive is dependent on your household income and the local rent value.
Ontario – Ontario has a few programs to help alleviate the costs of renting. Depending on the program you qualify for, you can receive financial help for rent payments, utility bills, and certain home repairs.
Quebec – Quebers who spend too much money on their rent can qualify for $100, $150 or $170 a month under the Shelter Allowance Program.
British Columbia – Low-income families in British Columbia can receive a monthly payment to help with high rental costs. To be eligible for the Rental Assistance Program (RAP), you must have a gross income of $40,000 or lower.
Final Thoughts
Canada’s rental housing market grapples with a complex interplay of factors, including record-low vacancy rates, surging rents, and demographic shifts. If you’re one of the millions of Canadians struggling with the current high cost of living, we advise you to take a look at different social and housing benefits offered by the government and local organizations. Whether it’s a tax rebate, municipal program or community program, exploring all of your available options may help alleviate some financial burdens.
