Despite a marked increase in rental supply in most large cities, surging demand pushed the national vacancy rate for purpose-built rental apartments down from 3.1 per cent to 1.9 per cent in 2022, according to the latest Rental Market Report from CMHC. This represents Canada’s lowest vacancy rate since 2001, reflecting widespread tightening across the country, including in Canada’s three largest rental markets of Montréal, Vancouver, and Toronto.

The surge in rental housing demand in the country reflected higher net migration and homeownership costs. Higher mortgage rates, which drove up already-elevated costs of homeownership, made it harder and less attractive for renters to make the transition.

“Lower vacancy rates and rising rents were a common theme across Canada in 2022. This caused affordability challenges for renters, especially those in the lower income ranges, with very few units in the market available in their price range,” said Bob Dugan, CMHC’s chief economist. “The current conditions reinforce the urgent need to accelerate housing supply and address supply gaps to improve housing affordability for Canadians, as stated in our report: Housing Shortages in Canada: Solving the Affordability Crisis.”

The overall average rent growth for two-bedroom purpose-built apartments common to 2021 and 2022 surveys was 5.6 per cent. This is a new annual high, well above average rent growth recorded between 1990 and 2022. Higher rent growth for two-bedroom purpose-built rents was widespread across Canada.

New data also indicates that the average rent growth for two-bedroom units that turned over to a new tenant was well above rent growth for units without tenant turnover (18.3% vs. 2.9%). This increased affordability challenges faced by renters trying to enter the market or find new housing.

Meanwhile, rental condominiums accounted for 19.3 per cent of the total stock of rental units across major centres. In Vancouver, Calgary and Toronto, more than a third of all rental supply are rental condominiums. While overall rental condo supply increased by 7.2 per cent in 2022, the average vacancy rate for these units remained low at 1.6 per cent (compared to 1.8 per cent in 2021).

 Report highlights:

• The primary rental apartment vacancy rate in Toronto fell to 1.7% in 2022, from 4.4% the previous year. Fewer disruptions to economic activity and immigration in 2022 resulted in a surge in rental demand.
• Strong demand in the Montreal rental market pushed the vacancy rate down from 3.7% in 2021 to 2.3% in 2022. Rent increases were also significant, especially for renters who moved.
• In Vancouver, the vacancy rate decreased from 1.2% in 2021 to 0.9% in 2022. Higher homeownership costs and migration to the region led rental demand to increase faster than supply.
• With Calgary’s economy growing beyond pre-pandemic levels, the rental market tightened to conditions not seen since Alberta’s last economic boom. Overall vacancy rate dropped to 2.7% (from 5.1% in 2021), the lowest since 2014.
• A strong economic rebound and record migration flows in Edmonton contributed to rental demand outpacing new rental supply in 2022. The purpose-built rental apartment vacancy rate was 4.3% in October 2022, down from 7.3% in October 2021.
• In Ottawa, strong demographic and economic conditions supported rental demand and as a result, the vacancy rate dropped from 3.4% in 2021 to 2.1% in 2022. The greatest declines occurred in central neighbourhoods, partly because of the return of post-secondary students.
• Record high supply growth has helped alleviate rental market tightness, while rising demand has accelerated rent increases in the Victoria rental market. The vacancy rate rose slightly to reach 1.5 % (from 1 % in 2021), mostly from the expansion of the rental apartment stock.
• In Hamilton, the vacancy rate for purpose-built rental apartments was the lowest since 2002 at 1.9%. The number of occupied units increased due to more student renters, higher full-time employment and fewer renters transitioning into homeownership.
• The vacancy rate in Halifax did not change in 2022, staying at the record low of 1%. The number of rental apartment units increased by 1,348. This was the lowest number of annual rental completions since 2016.
• In some of Canada’s largest centres, rented condominiums can be a driver of rental markets. Vancouver was the leader (with 42.5% of its rental stock made up of condominiums), followed by Calgary (37.5%) and Toronto (34%). Centres in Quebec generally reported smaller shares, including Montréal at 6.7%.
• The average rent for a 2-bedroom rental condominium apartment saw a significant increase to $1,930 from $1,771, about 9% year-over-year.

You can download the complete Rental Market Report from the CMHC website.