Canada’s rental costs increased 0.8 per cent in October from a month ago, and by 2.5 per cent since January, according to figures released by Statistics Canada on Wednesday.
In January, the statistical agency updated its methodology for tracking rental inflation, with experts saying the new approach is likely more reflective of market conditions.
Since the update, monthly changes have averaged just under 0.3 per cent, versus 0.1 per cent in the previous 25-year period.
“Our view is that the current method is much more realistic, and is a much more accurate depiction of the actual change in rental costs that tenants are facing,” said Douglas Porter, chief economist at Bank of Montreal, by e-mail.
Canada’s rental market has been racked by affordability woes of late, particularly in its largest markets, as demand overwhelms new supply coming to market. In 2018, the vacancy rate for purpose-built units dropped to 2.4 per cent from 3 per cent the year before, according to the Canada Mortgage and Housing Corp. The national housing agency cited higher levels of immigration as a key factor in rising demand.
As vacancies have dried up, rents have shot up in markets across the country. In Kelowna, B.C., the average rent for a two-bedroom apartment jumped 9.4 per cent in 2018 from a year earlier, CMHC data show. In Victoria, B.C., and Peterborough, Ont., it climbed 7.6 per cent. And in Oshawa, it rose 6.1 per cent. (Data reflect the wider census metropolitan areas.)
Costs are particularly steep in the Toronto and Vancouver areas, where vacancy rates sit around 1 per cent. The average two-bedroom condo in the Toronto area runs about $2,400 a month, according to CMHC, with Metro Vancouver above $2,000.
Nearly 1.8 million tenant households spent more than 30 per cent of their pre-tax income on shelter, as of the last census, or above what the CMHC deems as “affordable.”
Given tight conditions, the private sector has started to embrace purpose-built construction at levels unseen in decades. The number of rental starts rose to nearly 50,000 units in 2018, nearly double the previous 10-year average.
However, a lot of recent rental construction is for luxury units, said David Macdonald, senior economist at the Canadian Centre for Policy Alternatives (CCPA). In larger markets, he added, there’s a sizable contingent of households with ample money, but who are still priced out of home ownership -- and developers have taken notice.
“The market, left to its own devices, will build units for rich people," Mr. Macdonald said. "However, we also need a lot of new units for middle-class people that live and work in places like Toronto and Vancouver, but likely can’t afford the rent as it stands.”
Even with more construction, it might not be enough to satisfy demand given Canada’s population is set to continue climbing at historically high rates. A prime example is Metro Toronto, where about 8,000 purpose-built rental units are currently under construction, but whose population has increased by roughly 150,000 over the past year.
“We’re still under-building [in Toronto],” Shaun Hildebrand, president of research firm Urbanation, told The Globe in July. “Even though we’re seeing the level of development ramp up, it’s coming off of a depressed level, right? So the numbers all look very exaggerated.”
Mr. Hildebrand said three times as much rental construction is needed to satisfy Toronto’s demand.
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