London's apartment vacancy rate rose in 2024, but not for affordable units
Vacancy rate increase largely driven by newer, expensive units, CMHC data shows
More newly-built units and a drop in international students helped relieve pressure on London's purpose-built rental market, a new Canadian Mortgage and Housing Corporation (CMHC) report suggests.
Little in the way of relief, however, was seen in London's affordable housing stock, with rental rates remaining high.
According to CMHC's latest fall rental report, released on Tuesday, the vacancy rate for purpose-built units in the London and St. Thomas-area rose to 2.9 per cent this year from 1.7 per cent a year ago.
A record-high number of new units built, particularly in the downtown and in the city's south and southwest, contributed to the increase, said Anthony Passarelli, CMHC's lead economist for southern Ontario.
"You had a lot of rentals under construction in London, and a number of them were completed and put on the market for rent this year," he told CBC News.
"The last few years, prior to 2024, you had very low vacancies, very strong rent growth… a lot of that was due to the amount of people moving into the region."
Reduced demand from students, driven by the federal cap on international study permits, also played a role. Higher vacancy rate increases were seen in areas where many post-secondary students live, the report shows.
In northeast London, the apartment vacancy rate hit 3.5 per cent, up from 2.1 in 2023, while in the northwest, it rose to 2.0 per cent from 1.3. The downtown vacancy rate more than doubled to 4.1 per cent.
Average apartment rents, however, continued to climb, hitting $1,446 in October, up six per cent over the year, with the largest increase in London's northwest.
"The vacancy rate increasing does, sort of, start to soften things up a bit and put a little bit less pressure on rents … but vacancies have to increase a bit more for you to really see some rent stabilization," he said.
He noted that newer, more expensive units had a harder time being rented out, while older, less expensive units are still highly competitive and in short supply.
The data shows the increase in London's vacancy rate is largely due to new $1,500-plus units coming online. At the same time, units under $1,000 became more scarce, with their vacancy rate falling from around 1.5 per cent to 0.3.
"We keep hearing a lot, really from investors, that rents are pausing or declining, but they're not at a rate that's bringing us back to where rents are in alignment with actual income," said Laura Murphy, senior housing policy advisor for the Advocacy Centre for Tenants Ontario.
The mantra that simply adding supply will make rent affordable is undermined by lacklustre rent control policies and loopholes, she argues. Ontario's rent increase guideline for 2024 is 2.5 per cent, but buildings built after November 2018, and therefore all new builds, are exempt, meaning landlords can charge as much as they want.
This is illustrated by units where a new tenant has moved in during the past year, known as a "turnover unit." Such units saw an average rent hike of 31 per cent over 2023, compared to roughly three per cent for non-turnover units.
"Even if supply is being created, even if more homes are coming online, that's not actually helpful for tenants, especially those who can't afford housing to begin with," she said.
Passarelli said some property owners, particularly those of newer buildings, have realized that renters can only afford so much, and are trying out incentives to get units filled.
"There is a possibility that rent growth will slow and potentially stabilize, because there is a lot being added in the market, in London," he added.
"There is a lot under construction still, and there's a lot even in the planning pipeline … there's also some rental supply targeted specifically at middle- to low-income renters."
ABOUT THE AUTHOR
