Canadian Renters Face Worst. Prospects. Ever: Report

In most of Canada’s biggest cities, the rental vacancies sunk even lower in 2023, with the national rate reaching a 35-year low.

By Josh Sherman | 3 minute read

Vancouver has the lowest vacancy rate of any major Canadian city, but Toronto and Calgary are catching up.

Canadian renters are having the toughest time in more than a generation (and perhaps ever), suggests a recent RBC report. “It’s never been harder to rent in Canada—vacancy rates fall to 35-year low,” the report, which was authored by RBC economist Rachel Battaglia and published on Feb. 1, highlights. 

In fact, the national vacancy rate sank to a record low of 1.5% in 2023, according to Canada Mortgage and Housing Corporation data, as population growth and challenges related to the affordability of home ownership kept demand fierce among tenants, notes Battaglia. (The CMHC adds that stronger employment prospects stoked the flames in major cities as well.)

Of course, as it is often said: all real estate is local. Vacancy rates — which vary from city to city and in some cases remained flat compared to the previous year — are no exception.

The Prairies See Biggest Vacancy-Rate Declines 

Vancouver remained the tightest rental market across Canada’s six biggest cities in 2023 with a vacancy rate of 0.9%, roughly unchanged from the previous year, but other major markets are gaining ground — fast. While Toronto’s vacancy rate edged down to 1.4%, compared to 1.6% in 2022, it was tied by Calgary, where the vacancy rate had fallen from 2.7% in the previous year. Meanwhile, Edmonton’s vacancy rate reached 2.4%, which although the loosest of the major markets, had fallen the most of any city from 4.3% the year before.

The massive declines in Calgary and Edmonton are, writes Battaglia, “due, in part, to the substantial inflow of interprovincial migrants to the province which kept demand for rental housing robust.” Rounding out the top six largest markets, Montreal’s rate declined to 1.5% from 2% and Ottawa’s remained flat at 2.1%. Note that these CMHC vacancy rates, which represent the share of available existing units, only include purpose-built rental buildings with three or more units. Condos and social housing, for example, are not captured.  

In general, RBC says a vacancy rate of 3% represents a balanced rental market. Anything higher favours renters. Unfortunately for renters, though, only one census metro area in Canada has a rate of 3% or higher: Belleville, Ont., a small city of 50,000 that’s roughly two hours east of Toronto. “Tight conditions have spread beyond urban boundaries,” notes Battaglia.

More Supply is the Solution: Experts

Canada has struggled to build enough supply to meet demand. “High construction costs and interest rates, regulatory challenges, and labour shortages battered the housing development industry last year — impeding much-needed rental housing projects,” says Battaglia. To create a more balanced rental market, policymakers at all levels need to take action to spark more housing construction, she suggests. Battaglia mentions the federal government’s tax exemption on rental housing, introduced last year, as a positive example.

In a separate report citing the CMHC numbers, Central 1 Chief Economist Bryan Yu sees some other potential silver lining for renters, although like Battaglia he agrees more needs to be done. “There are signs that some relief could be on its way, although a return to affordable rents may not,” he writes. A recently announced two-year cap on international students should provide some rental relief. Yu also points to the more than 135,200 rental units under construction at the end of 2023, a 16% year-over-year increase. “That said, even as units complete, they will be absorbed quickly by the broadly undersupplied housing market which saw starts fall in 2023, and vacancy rates are likely to remain low through 2024 and 2025,” he adds.

The CMHC has been tracking the vacancy rate since 1988, when the measure sat at 2.8%, so the data don’t tell us what rental conditions looked like prior to that — but there’s no denying today’s renters are facing the toughest market in generations. In some cases, sky-high rents are even driving tenants into ownership. Renters may want to crunch the numbers and check listings to see if home ownership might make more sense given how expensive renting in major Canadian cities has become.