New research released by the John Molson School of Business at Concordia University, in partnership with private equity real estate firm Equiton, provides a fresh perspective on the future of Canadian rentals and housing affordability. The report, entitled AI-Driven Insights into Key Factors Influencing Canada’s Rental Market, examines the long-term effects of population growth and other trends driving rapid rent increases and low vacancy rates across the country.

“We saw a lack of in-depth analysis of Canada’s housing crisis at the regional level and felt the need to address that,” said Aaron Pittman, Senior Vice-President and Head of Canadian Institutional Investments at Equiton, which commissioned the research. “While the housing crisis is an issue affecting all Canadians, Dr. Yönder’s AI-driven forecasts make it clear that a homebuilding approach that works in one region won’t necessarily work in another.”

Written by Dr. Erkan Yönder, Associate Professor of Real Estate and Finance, and his team at Concordia, the report aims to support the policymakers, investors, and innovators working to address the housing crisis.

Key takeaways include:

• Rental rates will experience significant increases in major cities including Vancouver, Montreal, and Calgary. Estimates indicate the average two-bedroom monthly rent in Toronto will reach $5,600 (a 72% increase compared to 2023) in under 10 years.
• More supply doesn’t necessarily lead to lower rents, defying traditional economic expectations. Rental growth in most major markets will continue to accelerate until annual housing completions reach approximately 6% of total dwellings. In the GTA, that is nearly six to seven times the levels achieved in 2023.
• In the GTA, annual housing completions must reach an astounding 11% of the total number of dwellings (nearly 10 times the rate achieved in 2023) before supply levels result in a reduction in rents.
• Elevated rent levels are largely driven by immigration. Findings show that a 1% increase in the share of immigrants in a market increases local rents by approximately 0.6%. Meanwhile, a 1% increase in non-permanent residents can increase local rents by 2%.
• Extreme demand is steadily driving vacancy rates toward 1% across Canada, adding pressure to an already serious situation.

Earlier this year, the Canada Mortgage and Housing Corporation (CMHC) identified the private sector as an important partner in addressing Canada’s housing shortfall. The government agency estimates that the country must add 5.8 million new housing units by 2031, 2.2 million of which needs to be purpose-built rental. However, Yönder noted that new supply has historically fallen far short of the pace needed to meet demand.

“Canadian immigration and housing policies have been out of sync for decades,” he said. “This research helps create a roadmap showing where private investment, regulatory relaxation, and infrastructure improvements could have maximum impact in terms of creating new housing.”

Yönder added that he expects to reveal the details of more upcoming research in collaboration with Equiton later this year.