Ontario Construction News staff writer
Canada’s rental housing shortage will quadruple to 120,000 units by 2026 without a significant increase in units, Royal Bank of Canada said in a report.
Research analyzed vacancy rate data released in January by the Canada Mortgage and Housing Corporation (CMHC) and concluded that reach the optimal vacancy rate of three per cent, Canada would need to add 332,000 rental units over the next three years, compared with the 70,000 units built last year.
Canada’s vacancy rate fell to 1.9 per cent in 2022, its lowest point in 21 years.
Canada’s rental housing stock grew by 2.4 per cent in 2022, led by Calgary at 7.4 per cent and Ottawa-Gatineau at 5.5 per cent, while Toronto and Montreal saw the smallest percentage increases at 2.1 per cent and 1.4 per cent, respectively.
“We haven’t seen that many additions to the purpose-built inventory in almost a decade, so you would think that added supply of units would ease some of the competition, but what the CMHC rental market data revealed to us was that it didn’t,” said RBC economist Rachel Battaglia.
Slow growth has been outpaced by rapidly increasing demand, partly fuelled by high immigration levels, she said. Annual federal immigration targets are set to grow eight per cent by 2025, meaning demand is unlikely to let up.
Also, a growing number of Canadians are choosing to live alone.
“You have a lot of people being funnelled into the rental market who maybe would have liked to own something but it’s just not financially in the books for them right now,” said Battaglia.
The report estimated an existing deficit of 25,000 to 30,000 units of rental housing units across Canada and recommended turning condo units into rentals, converting commercial buildings and adding rental suites to existing homes to help ease the pressure.
Without such measures, Battaglia said the market could “become infinitely more competitive “which is not something that we want to realize given the competition we’re already seeing.”
“You’re already seeing rents increase dramatically.”