Yardi’s new Canadian National Multifamily Report says fundamental metrics such as rent growth and vacancy have moderated from peak levels but remain robust by long-term standards. 

Rent growth is likely to continue decelerating, but slowly, as demand is heightened by ongoing population growth while delivery levels are stagnating.

“While there are still double-digit rent increases on new leases, report-over-report it’s not as high an increase,” Yardi senior director of residential Wayne Tuck told RENX. “From my perspective, that's really driven by the base affordability and inflationary pressure.”

The average national in-place rent (an aggregation of new leases, renewals and existing leases) increased by $18 per month in the second quarter to a record-high $1,521, up 1.2 per cent quarter-over-quarter and 6.3 per cent year-over-year. The annual growth rate came down from 6.5 per cent over the last two quarters, but remains well above long-term levels.

In-place rent growth was led by Alberta and Saskatchewan, which are drawing households looking for more affordable markets despite not having rent controls in place like other provinces.

“Most of our clients view rent controls as problematic,” Tuck explained, citing a belief that they're a barrier to generating enough revenue to maintain and improve existing structures and construct more purpose-built apartment buildings.

Calgary led the way with 12.9 per cent in-place rent growth, followed by Saskatoon at nine per cent and Edmonton at 8.5 per cent, with Vancouver at 4.9 per cent and Winnipeg at 4.3 per cent having the lowest increases.

Lease-over-lease and renewal rents

The growth rate for lease-over-lease rents — which represent new leases on units that are re-leased after becoming vacant — moderated slightly to 10 per cent in the second quarter. 

Of the 12 census metropolitan areas surveyed by Yardi, the highest new lease growth rates were in Halifax at 15.5 per cent, London at 13.5 per cent and Kitchener-Cambridge-Waterloo at 13.2 per cent. 

Halifax continues to experience high levels of in-migration, while Ontario markets are tight due to strong demand and limited new supply.

Cities with the lowest new lease rent growth rates were Winnipeg at 3.2 per cent and Montreal at 6.5 per cent.

The average renewal lease rate increased by 4.3 per cent nationally, down by 10 basis points from the previous quarter, which was a multi-year high. Increases were led by Calgary at 10.5 per cent and Edmonton at 7.5 per cent year-over-year.

Vacancy rate holds steady

The national apartment vacancy rate rose by 10 basis points to three per cent in the second quarter, the highest level in two years, but still remains well below historical norms. 

Tuck said the national vacancy rate has been hovering around three per cent for several quarters and he believes that has become the new baseline.

Halifax (1.4 per cent) and Winnipeg (1.5 per cent) had the lowest vacancy rates and both have steadily trended downward in recent quarters. 

While Winnipeg recorded a multi-decade-high 2,675 apartment deliveries in 2023 and has experienced increased construction since 2020, it hasn’t been enough to make up for the long-term shortage created between 1990 and 2010.

Calgary had the highest vacancy rate at four per cent, up 210 basis points year-over-year. It was followed by London at 3.5 per cent, Kitchener-Cambridge-Waterloo at 3.4 per cent, Toronto at 2.8 per cent and Vancouver at 2.4 per cent.

Vacancy increases were concentrated in bachelor units. With monthly costs so high, many renters are seeing more value in sharing larger units with roommates rather than living alone in a bachelor apartment.

National turnover rate drops, construction lags

The annual turnover percentage, which measures the number of residents that didn’t renew leases over the previous 12 months, continues to drop. The turnover rate was 22.9 per cent in the second quarter, down 10 basis points from the previous quarter and 60 basis points year-over-year. 

The annual turnover rate was in the 28 per cent range in 2020 and has steadily declined since then.

Toronto had an 11.7 per cent turnover rate, about half of the national average, while Vancouver’s was 17.9 per cent. On the high end, in cities with no rent controls, Saskatoon’s rate was 40 per cent, Calgary’s was 38 per cent and Edmonton’s was 35.7 per cent.

While apartment construction isn’t nearly enough to meet the demand of Canada's growing population, completions reached a multi-decade high last year. 

According to the Canada Mortgage and Housing Corporation, Canada delivered 112,819 purpose-built rental apartment units in 2023, making up 60.1 per cent of the 187,630 units that came online. That compares to 40,711 new apartment units representing 28 per cent of all new housing in 2003 and 65,157 new apartment units accounting for 45.5 per cent of all new housing in 2013.

Lengthening construction times due to difficulties in securing financing, delays in obtaining municipal approvals and a shortage of workers have slowed the number of completions.

Apartment starts are stagnant, which doesn’t bode well for completions going forward. Annualized starts totalled 171,000 nationally as of May, which is in line with levels over the past two years.

Impact of government and monetary policies

While removing sales tax from apartment construction costs has been welcomed, clients have told Tuck that speeding up new apartment construction would be further helped by lower interest rates and development charges.

“As the federal government, the provinces and the municipalities get more engaged in dealing with the housing crisis going forward, I think we’ll start to see new supply come on,” Tuck said.

A disconnect between immigration and housing policies has worsened Canada’s housing crisis in recent years and led to the federal government recently restricting the number of international students entering the country.

“We welcome immigrants with open arms, and they’re an important part of developing the economy here in Canada, but we haven’t done a good job of making sure they have places to live,” Tuck noted.