Rental Vacancy Rate

The average rental apartment vacancy rate in Canada has experienced relative volatility over the previous two decades. In 2016, Canada's 35 major centers grew 3.0%, yet experienced sharp declines during the following years. According to the Canada Mortgage and Housing Corporation’s Housing Market Outlook, the supply of rental units grew, supporting growth in the rental vacancy rate. Overall, as the supply of rental units exceeded demand, rental vacancy rates increased. However, the rental vacancy rates fell 20.6% in 2017 representing a correction from the previous two years. Typically, the rental vacancy rate needs to remain elevated for a period of time, thus enabling developers to respond to changes in market demand with new multiunit rental starts.

In 2020, rental vacancy rates increased sharply, reversing a several years long trend of a declining vacancy rate, which began in 2017. A drop off in tourism and travel activity, as a result of the pandemic, reduced demand for Airbnbs and other short-term rentals. As a result, owners converted their short-term rentals into long-term apartment rentals. After the majority of universities switched to conducting online classes, there was a significant drop in demand for housing from students. This also contributed significantly to the increase in the vacancy rate in 2020. A decline in demand for short-term rentals increased the supply of rental properties and contributed to an increase in the vacancy rate while, simultaneously, a high level of uncertainty made fewer people willing to move. As a result, the rental vacancy rate increased 55.0% in 2020 alone. In 2021, the rental vacancy rate remained unchanged from 2020, staying at 3.1%.

Rental vacancy rates vary significantly by province and territory. In larger centers, rental vacancy rates have typically been lower than the national average. For example, in 2019, the nation-wide rental vacancy rate was 2.0%. Meanwhile in Victoria, the rental vacancy rate was significantly lower, at 1.0%, while Vancouver recorded a rental vacancy rate of 1.1% for that year. Conversely, some metropolitan areas, such as Regina, had a rental vacancy rate of 7.6% that year. Additionally, Saskatoon had a rental vacancy rate of 5.6%.

The rental vacancy rate is inextricably tied to the number of housing starts, the mortgage rate and population. If mortgage rates are low, demand for home ownership may rise, dampening demand for rentals, which occurred during the pandemic period. As inflation surged during 2022 and mortgage rates rose however, rental vacancy levels began to fall as homeownership became less affordable, which led to more individuals in Canada deciding to rent. In 2022, the rental vacancy rate fell over 35.0% and fell an additional 28.0% in 2023 as the Bank of Canada aggressively rose the policy rate. According to Aled ab Iorwerth, Canada Mortgage and Housing Corporation’s deputy chief economist, falling vacancy rates have largely been driven by low supply in Toronto and Vancouver in recent years. However, vacancy rates have been showing signs of growth in the last quarter of 2024, reaching highest levels since 2020. Although demand is expected to remain steady, vacany rates are projected to increase in 2025 due to growing construction activity and slowing rental growth. This is expected to shift the rental market.