Are rents in Canada spiralling out of control? While only a handful of cities across the country enjoy modest monthly rents, recent inflation data highlight that rents are growing at the fastest pace in four decades nationwide.
According to Statistics Canada, the annual inflation rate rose 3.1 per cent in November, unchanged from the previous month. Within the consumer price index, there were three noticeable increases: mortgage interest costs (29.8 per cent), rent (7.4 per cent), and food purchased from stores (4.7 per cent). These were the largest contributors to the year-over-year jump in prices.
Economists argue that this is unsustainable for Canadians, particularly for low-income households.
Additionally, they argue that various federal and provincial government subsidies, such as the Canada-Ontario Housing Benefit (COHB), could further support higher rents.
For example, Holly Einboden, a spokesperson for Halton Region, told The Globe and Mail that rents are higher than what is published in the Canada Mortgage and Housing Corporation (CMHC) survey.
“Halton Region has advocated for a higher average market rent to increase the monthly Canada-Ontario Housing Benefit subsidy amount to better support individuals and families with maintaining housing affordability,” she told the newspaper.
Rents in Canada
Meanwhile, Rentals.ca and research firm Urbanation released the latest rental data on a city-by-city basis. The study found that average asking rents for all residential property types in the country finished 2023 at an all-time high of $2,178, up nearly nine per cent from the same time in the previous year.
Unsurprisingly, the most expensive rental markets in Canada were Vancouver ($2,700), Burnaby ($2,600), Toronto ($2,521), Mississauga ($2,371), and North York ($2,284). The cheapest rental markets in the Canadian housing industry were Saskatoon ($1,150), Lethbridge ($1,193), Regina ($1,213), Fort McMurray ($1,240), and Edmonton ($1,285).
Here is a breakdown of different property types:
- Apartment: +12.8 per cent year-over-year to $2,076
- Condominium: +6.9 per cent year-over-year to $2,340
- House/Townhome: +5.9 per cent to $2,354
Ultimately, the size of rental inflation has been fuelled by a lack of supply, although there are some expectations that stocks could improve throughout the year.
“Rental demand is expected to remain strong, experiencing some moderation compared to 2023 due to a slowing economy, a reduced number of non-permanent residents, and an improvement in home-buying activity as interest rates begin to decline,” the report stated. “As well, a continued rise in apartment completions and an increase in tenant turnover expected for this year should add more supply to the market in the near term and help temper rent growth.”
New Rental Housing Market Index
Statistics Canada recently announced that it is launching a new rental housing market index. The new project will monitor rental trends in the Canadian real estate market. The information will ensure landlords and tenants make “informed decisions” and policymakers can accurately address Canadians’ housing needs.
Affordability Challenges for Renters
Since the COVID-19 public health crisis, the issue of housing affordability has been widely discussed. However, the subject has mostly been in the context of acquiring residential properties. What is often omitted in these conversations is the high cost of renting apartments and houses.
Suffice it to say demand has far exceeded supply, particularly in major urban centres. One contributing factor to the higher demand? Immigration.
The federal government aims to bring in millions of immigrants in the coming years, even though officials have warned that it might impact housing affordability and services. The Canadian Press recently obtained documents that found Immigration, Refugees and Citizenship Canada (IRCC) servants warned leaders that housing construction has failed to keep up with the pace of population growth.
“In Canada, population growth has exceeded the growth in available housing units,” one slide deck reads. “As the federal authority charged with managing immigration, IRCC policy-makers must understand the misalignment between population growth and housing supply, and how permanent and temporary immigration shapes population growth.”
The Bank of Canada (BoC) has presented comparable analysis in the past, warning that growing population growth, which has been driven almost entirely by immigration, would push up rents and home prices. That is unless Canada can construct more homes at accelerated levels.
Because newcomers strengthen Canada’s labour force with their knowledge, skills and hard work. They play a crucial role in supporting the economy’s capacity to grow now and in the future. But there have been hiccups. Canada has long had housing supply challenges. The recent increase in newcomers has coincided with those material supply issues, raising questions about how chronic housing challenges might limit Canada’s future growth and what the implications are for inflation.
Bank of Canada Deputy Governor Toni Gravelle
Other economists have also offered similar arguments.
Home prices are stickier, and that’s a conundrum for the central bank because they were assuming that with higher rates, home prices will actually come down. Population growth is good down the road, but the capacity constraint pushes inflation higher. (Source)
Stefane Marion, Chief Economist and Strategist, National Bank of Canada
Ultimately, the immigration objective has bolstered competition for limited housing supply, whether to buy or rent. With more newcomers arriving in Canada over the next two years, residents in large cities could continue facing higher rents.