Canada's Rental Housing Shortage Could Quadruple by 2026
According to a recently released report from RBC Economics, Canada’s rental housing shortage could quadruple by 2026 if there is not a significant increase in rental construction. The report predicts that without a significant boost in rental stock, the country’s rental housing gap could exceed 120,000 units by 2026, which would quadruple the current deficit.
Robert Hogue, the assistant chief economist and lead author of the RBC report, warned that without a ramp-up in rental construction, the housing market could become even more imbalanced, and the optimal vacancy rate of 3% would become further out of reach. He added, “We don’t see Canada returning to that optimal 3% vacancy rate without a significant acceleration in supply.”
To achieve a three per cent vacancy rate, which is considered healthy and balanced in a rental market, RBC estimates that 332,000 new units need to be constructed between now and 2026. Currently, the national vacancy rate for purpose-built rentals has dropped to 1.9%, down from 3.1% in 2021, according to data from the Canada Mortgage and Housing Corporation (CMHC).
The report attributes the current hot rental market to a ramp-up in immigration and would-be homebuyers being sidelined for longer due to eroding affordability. CMHC data shows that the average monthly price for a two-bedroom unit in a purpose-built rental building rose 5.6% to $1,258 last year. Meanwhile, the average two-bedroom price of a rental condo jumped nine percent to $1,930, with higher rates in larger cities like Toronto and Vancouver.
While Canada’s purpose-built rental housing supply grew 2.4% last year, the fastest pace since 2014, the growth is outside of the cities that need it the most. The report shows that cities like Calgary and Ottawa saw the most significant increases in purpose-built rentals, while Toronto and Montreal lagged severely. The report noted, “The slow growth in rentals in these cities will be especially problematic as demand for rented accommodation continues to outgrow supply.”
The report suggests that turning condo units into rentals, converting underutilized commercial buildings into rental housing, or having homeowners add rental suites to their homes would help increase supply. However, it’s not enough to meet the growing demand. RBC argues that the real key to improving affordability and stability in the rental market is to “considerably grow the supply of purpose-built rentals.”
Read the RBC report here
