Canada Mortgage and Housing Corp. (CMHC) has released its annual report – The Rental Market Survey – and it’s a pretty bleak picture for renters in Canada. After two years of easing, 2017 has slid back into declining vacancy rates.
While renters struggle and complain about affordability and availability in most urban centres, the numbers are in, and renters’ complaints are definitely founded in fact. CMHC reports vacancy rates are down across the country. In October, 2016, CMHC reports the national vacancy rate at 3.7 per cent. For 2017, the vacancy rate has dropped to a national average of 3.0 per cent.
The lowest vacancy rates in Canada are:
Kelowna, BC: 0.2 per cent
Abbotsford-Mission, BC: 0.2 per cent
Victoria, BC: 0.2 per cent
Vancouver, BC: 0.9 per cent
Kingston, Ont.: 0.7 per cent
Toronto, Ont.: 1.0 per cent
St. Catharines-Niagara, Ont.: 1.5 per cent
Ottawa, Ont.: 1. 7 per cent
London, Ont.: 1.8 per cent
Hamilton, Ont.: 2.4 per cent
Winnipeg, Man.: 2.8 per cent
CMHC examined the vacancy rates of purpose-built rentals in Canadian centres with populations of more than 10,000. “Demand for purpose-built rental apartments outpaced growth in supply in 2017, leading to a decline in the vacancy rate,” says Senior Economist Gustavo Durango. There were about 23,000 new units combined in Canadian markets in 2017, compared to approximately 40,000 in 2016, showing a significant lack of new supply to keep up with population growth. A combination of immigration, an aging population and young adults entering the workforce and becoming independent of their parents, the supply has been strained and new stock has grown too slowly to support demand.
The CMHC Rental Market Survey notes that the largest increase in purpose-built rental supply occurred in Ontario and Quebec. But the increase still wasn’t significant enough to stave of vacancy decline. “Rising costs of homeownership and lack of new rental supply kept vacancy rates at historic lows,” says Principal Market Analyst Dana Senagama.
While the new stock of condominium apartments – the secondary rental market – is a significant support to urban rental supply, the Survey says this secondary rental market also experienced a decline in vacancy. The national average vacancy rate for condominium apartments in 2016 was 1.9 per cent, which fell to 1.6 per cent in 2017. In the GTA, condominium vacancy rates dropped to a nine-year low, in spite of the fact that the supply grew by approximately five per cent. This gain was minimal, as 2016 saw an increase to rental condominium supply of 14 per cent. The hot housing market encouraged many investor-owners to sell their units, resulting in lower gains in supply, year-over-year.
The same holds true for the Vancouver market, where there was intense demand for condo apartments but not enough new stock to keep up with demand, keeping the vacancy rate in Vancouver’s secondary rental market under one per cent. More condominium units were added to the rental supply – 1,841 in 2017 vs the 1,516 in 2016, which helped the vacancy rate marginally increase to 0.6 per cent in 2017, up from 0.3 per cent in 2016. This minimal vacancy rate is critical in Vancouver, where the secondary rental market is larger than the primary, purpose-built stock, providing residency to approximately 60 per cent of Vancouver’s total supply of rental units.
Price followed suit in markets where the vacancy rates tightened. Supply and demand supports that increase – the demand has created a very competitive environment for rentals in major cities, making it a landlord’s market and seeing rents increase significantly. This is developing a disparity in pricing among rentals.
Current market conditions and soaring rents may dissuade people from moving from their homes in order to avoid a dramatic rent increase. While existing renters who remain in their homes in provinces such as BC and Ontario have rent control and won’t see their rents increase beyond the provincially legislated maximum, new renters are facing the big hikes, since landlords are able to raise the rents for new tenants as apartments are vacated and newly rented out. In Vancouver, the average rent for a vacated apartment was 11 per cent higher than an long-term tenanted unit. The GTA’s average rent is also higher in recently vacated units than in long-term tenanted units – above the 1.5 per cent annual guideline increase for 2017.
Ultimately, people have to live somewhere. In urban centres with minimal vacancy, a larger problem is that affordable rentals are virtually non-existent. Renting has ceased being a budget-accommodating option. In markets that have higher vacancy rates, there is still visible tightening. Calgary saw more new units than the city has seen since 1994, yet the vacancy rate went from 7.0 per cent in 2016 to 6.3 per cent in 2017. Edmonton remained at 7.0 per cent vacancy, year-over-year. The city experienced a significant increase in condo apartment supply, which had essentially no effect on vacancy rates, though rents did decrease as the higher vacancy rate puts Edmonton property owners in a position of competing for good tenants and lowering rents to entice their interest. In addition to Edmonton, Regina is also at 7.0 per cent vacancy rate, St. John’s is at 7.2 per cent and Saskatoon tops the country at 9.6 per cent. Even at their nation-topping rates, Saskatoon experienced an overall decrease in vacancy rates from 2016.
View the full CMHC Rental Market Survey at CMHC.ca.