There's no relief in sight for rising rent prices across major Canadian markets as the country's population continues to outpace available rental inventory.
After rent prices plummeted during the pandemic, particularly in Canada's major cities, they've made significant strides towards recovery in recent months. And they're not done quite yet. A new report from Rentals.ca and Bullpen Research & Consulting is projecting further jumps in rent prices in Toronto, Mississauga, Vancouver, Montreal, and Calgary throughout the rest of the year.
“The daily pandemic news put the housing crisis in the background for a while,” said Rentals.ca CEO Matt Danison. “But now as COVID-19 recedes, we are talking again about our lack of supply. This problem will keep rents on the rise in most of Canada for the rest of the year.”
Toronto is expected to see the largest jump in rent prices out of any Canadian market with an 11% annual rise projected by the end of 2022, bringing the average rent price up to $2,495. Mississauga follows behind at 7%, Vancouver at 6%, Montreal at 5%, and Calgary at 4%. It's important to note, however, that even with these increases in store, rent prices in most markets will still be below pre-pandemic levels.
“The forecast prepared for the rest of 2022 sees continued growth in the rental market following the unprecedented declines experienced from April 2020 to April 2021,” says Ben Myers, president of Bullpen Research & Consulting. “Despite the continued upward trend in 2022, Toronto, Mississauga, Montreal and Calgary are expected to finish the year below their peak rent levels from late 2019 and early 2020.”
These projections, the report notes, could be affected by the introduction of new government regulations as well as the spread of new COVID-19 subvariants.
The Supply Issue
Vacancy rates have trended downwards across Canada, falling from 2020 to 2021 -- a trend that's expected to continue into 2022. In Vancouver, vacancy rates sit at just 1.2%, according to CMHC data. As vaccination rates climbed and pandemic restrictions eased, demand for rentals surged. This, coupled with the fact that rental options in large markets, especially for low-income renters, are extremely limited, is continuing to put upward pressure on prices.
“Improving economic conditions and partial recovery in net migration, bolstered by high vaccination rates and easing pandemic restrictions into fall 2021, supported recovery in rental demand,” said Gustavo Durango, senior economist at CMHC.
The gap between supply and demand is a major issue that's not receiving enough attention, says real estate investment expert Jennifer Hunt, noting that “many economists and real estate researchers are showing this gap is tremendous." In fact, a recent Scotiabank report stated that Canada's housing supply falls short compared to other G7 countries.
Despite all levels of government putting an emphasis on building new homes, there has been one significant roadblock: the speed of construction. Everything from supply chain disruptions to COVID-19 restrictions to lumber costs and inflation has affected this, Hunt says.
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She also points to Canada's high immigration targets as another source of upward price pressure.
“As long as Canada’s immigration targets remain high, which there is zero reason to believe this would change,” Hunt says, “New arrivals will place pressure on rental housing demand, pushing rents even higher.”
Countering NIMBYism
Although Hunt is all for the construction of new homes in her neighbourhood, stating that she hopes they will be built "in my backyard because I want to be a part of the solution," not all Canadians feel this way. Often residents fuelled by NIMBYism object to new developments -- something the report notes "contributes to significant delays and increased costs, which make many rental projects unviable."
Tony Irwin, president and CEO of the Federation of Rental-housing Providers of Ontario (FRPO), speaking specifically to building new housing in Ontario, highlighted the dissonance between residents knowing there needs to be more housing but not wanting it built near them.
“In a recent survey of 1,500 GTA residents conducted by the Building Industry and Land Development Association and the Toronto Real Estate Board a vast majority (87%) agreed that housing affordability can be improved by new developments," Irwin wrote in a February Linkedin post. "However, a majority of respondents also indicated that they were against new developments happening near their place of residence.”
To combat the negative NIMBY effects, Irwin champions updating out-of-date zoning policies to allow more as-of-right builds in key areas such as transit corridors. He also recommends density incentives for purpose-built rental projects in areas where rentals are needed the most, as well as educating the public on the root causes of the supply crisis while also addressing common concerns that give rise to NIMBYism.
“It is only by working hand-in-hand with local communities that we will find a solution to the housing crisis in Ontario,” Irwin said.
