Canada is facing a rental housing crisis, with the number of affordable housing units nationwide decreasing at an alarming rate. An analysis of over 1,000 communities in the country revealed that less than 1% of rental properties are vacant, making rent affordable for most Canadian tenants.
Based on 2021 census data and a rental market survey conducted by the Canada Mortgage and Housing Corporation (CMHC) in October 2023, CBC found that a family with a pre-tax annual income of $75,000 can afford rent and utilities up to $1,875. This is based on keeping rent below 30% of total income, a widely recognized affordability threshold.
In October 2023, in affordable communities, Toronto had 1,352 potentially vacant two-bedroom rental properties, accounting for 0.49% of all two-bedroom rental units.
In Kingston, Ontario, the rate was even lower at 0.4%, and in Peterborough, Ontario, it was only 0.3%. Belleville-Quinte West and Barrie, both in Ontario, had the highest rates at 2.9%.
With a dwindling rental supply, rents in Canada have surged significantly in recent years. Since 2018, the average rent for a two-bedroom rental property has increased by 70% more than wage growth. This means fewer housing options for low-income Canadians. In October 2023, in 35 major metropolitan areas where full-time minimum wage workers can afford to live, only 1,400 bachelor or one-bedroom rental units were vacant, accounting for 0.09% of all such units.
For families, finding a suitable home is also challenging. Rental options for multi-bedroom properties are scarce and expensive. There are only 14,000 potentially vacant rental units with two or more bedrooms that are affordable for median-income families, representing 0.5% of all such rental properties.
For single-parent families, there are only 7,200 potentially vacant and affordable rental units, with a lower proportion of 0.3%.
The situation is grim across all provinces. In the past five years, rent increases in Nova Scotia, New Brunswick, and Alberta have been nearly double the wage growth. Vacancy rates in all provinces are below the housing shortage threshold.
Based on CMHC’s vacancy rates and average rents, along with Statistics Canada’s average hourly wages, CBC found that in October 2023, in Ontario, the vacancy rate for two-bedroom rental properties was 1.7%, indicating a housing shortage; the average rent increase for a two-bedroom unit exceeded wage growth by 48%.
From 2018 to 2023, the average rent for a two-bedroom rental property rose from $1,263 to $1,689 per month, a 34% increase, while average wages grew by 23% from $28.18 to $34.63 per hour during the same period.
Steve Pomeroy, Executive Consultant and Industry Professor at McMaster University’s Canadian Housing Evidence Collaboration, believes that the rapid population growth driven by temporary immigrants has put pressure on the rental housing market.
He mentioned that while the federal government is currently attempting to address this through visa quota regulations, long-term solutions will take 3 to 4 years to build enough housing to accommodate everyone.
However, Kevin Hughes, Deputy Chief Economist at CMHC, emphasized that a large influx of immigrants is not the sole factor contributing to the crisis. He explained, “In some markets, there has been an increase in supply, but mainly in high-priced housing. The situation is different for affordable rental properties. That’s the biggest problem.”
Furthermore, the construction industry is facing labor shortages and high inflation, leading to rising material costs.
Simultaneously, high property prices and interest rates are discouraging potential first-time homebuyers, pushing them to continue renting. With a strong job market, young wage earners are eager to transition from their parents’ homes and live independently.
All these factors combined have placed Canadians in a dilemma of high rental demand and minimal vacant properties.
Jean-Philippe Deschamps-Laporte, Assistant Director of Income and Social Economic Well-being Statistics Center at Statistics Canada, expressed concerns that the decrease in the number of affordable housing units could have dramatic ripple effects on vulnerable groups. The increase in housing costs is a significant driving factor of homelessness. Indigenous peoples and racialized communities are more likely to be renters and disproportionately at risk of being unable to afford rent. For victims of abuse, predominantly women, finding a safe new residence is even more challenging.
Catherine Leviten-Reid, Associate Professor at the University of Cape Breton, emphasized the necessity for large-scale investment in affordable rental housing for those most in need. She highlighted that recent federal housing grants and the Tenants’ Rights Act will address the crisis, but their effects may not be seen for several years.
Leviten-Reid stressed the importance of new regulations, suggesting that landlords annually report information about their rental properties, including vacancies and utilities for rented units. This would aid in assessing housing conditions and filling significant gaps in rental market data.
CBC’s analysis revealed a lack of information beyond major cities, with many local authorities turning a blind eye to the issue.
Vacancy control is another crucial legislation that can prevent steep rent increases when tenants vacate, attracting new renters. Under such a policy, newly constructed rental units should not face rent increase restrictions within the first ten years to avoid hindering the much-needed new housing construction.
Deschamps-Laporte of Statistics Canada noted, “For most Canadians, renting is a transitional period between leaving the family home and becoming a homeowner.”
He explained that as housing costs rise, fewer tenants can save enough to purchase their first property, making it a long-term investment and an essential part of retirement planning for many. In fact, the age of first-time homebuyers is gradually increasing.
Recent analysis from the research center he oversees indicated that homeowners’ children are more likely to become homeowners themselves, highlighting the existence of a “family advantage.” Deschamps-Laporte stated that Canada is facing a situation where some are homeowners, while others are renters, posing housing fairness issues.
CMHC’s Hughes warned that without changes, more people will be unable to afford housing, potentially hindering economic development in major cities. He emphasized, “To allow cities to grow, we need working-class people, and working-class people need a place to live.”
In conclusion, the high demand for rental housing and limited vacant properties in Canada has created a pressing issue. Efforts are being made at various levels to address the affordability crisis and ensure that adequate housing is available for all Canadians.