Canada added record rental supply in 2024, but most units were too pricey for the average renter

The Canada Mortgage and Housing Corp. says the pace of rent growth cooled significantly this year as Canada added its largest share of purpose-built rental supply in over three decades.

Despite the slowdown in rent growth, the housing agency said affordability remained "strained." It noted the increase in rental stock was driven by higher-priced units being completed, many of which were too expensive for the average renter.

The federal housing agency said in a report on Tuesday that the vacancy rate for purpose-built rental apartments sat at 2.2 per cent in October, when it conducted the annual survey. That was up from a record low of 1.5 per cent last year.

The average rent for a two-bedroom purpose-built apartment, which the CMHC uses as its representative sample, grew 5.4 per cent to $1,447, compared to an eight per cent increase in 2023.

The figures represent actual amounts tenants pay for their units, meaning average prices often appear lower than those listed in other reports that measure average asking rents set by landlords.

For instance, the average asking rent for two-bedroom purpose-built apartments last month was $2,294, according to separate research from Rentals.ca and Urbanation.

The CMHC said rents increased by 23.5 per cent when units turned over, which was close to 2023 rates. Rent hikes on turnover units accounted for more than 40 per cent of the overall rent increase in 2024.

It said Canada's supply of purpose-built rental apartments grew 4.1 per cent year-over-year, the highest increase in more than 30 years.

"Affordability for Canadian renters remains a challenge, particularly for new tenants who faced significant rent hikes as units turned over, limiting mobility for existing tenants and making it harder for prospective tenants to enter the market," CMHC deputy chief economist Tania Bourassa-Ochoa said in a statement.

"However, record growth in rental supply helped slow down average rent growth and raise vacancy rates closer to the historic average, underscoring the critical role of added supply in improving housing affordability."

Meanwhile, the average rent for a two-bedroom condo was $2,199, with the vacancy rate for such units remaining unchanged at 0.9 per cent annually.

Rental price growth slows in some cities

The report said Toronto had the lowest rent growth among major regions at 2.7 per cent, down from 8.8 per cent in 2023, which it attributed to rising vacancy rates and having the lowest turnover rate. As rental supply grew, it appeared Toronto landlords took a "more cautious approach" to rent increases, according to the CMHC's analysis.

It also noted rental apartment completions in Montreal remained among the highest on record, pushing vacancy rates higher, while in Vancouver, rental supply grew at a slower pace than the previous two years but still above historical rates.

In both markets, persistently high demand meant rent growth didn't slow as much as it did in Toronto.

Calgary's rent growth slowed "significantly" in 2024 but still outpaced all other large urban centres due to strong demand, driven by population growth and stable economic conditions.

Halifax also saw strong rental supply growth but slower population growth, leading to a higher vacancy rate and the biggest drop in average rent growth among major markets.

Unlike most regions, Ottawa and Edmonton saw rent growth slightly accelerate this year, primarily driven by higher rent increases for new tenants at turnover and in newly completed units entering the market.