Canada’s multifamily housing market is facing a new reality: rising vacancies, changing tenant behaviours and other challenges.

Let’s unpack these trends and their implications for apartment owners and investors.

Vacancies are rising across the country, but the story behind these numbers is more nuanced. Population growth, slowed turnover and shifting economic pressures are reshaping how tenants live — and how landlords must adapt.

Rising vacancy despite population growth

It might seem counterintuitive: Canada’s population is approaching 40 million, yet multifamily vacancies are rising. Historically, increasing demand for housing would reduce vacancies, but today’s market is defying that logic.

The reason? Tenant behaviour is shifting in response to economic realities and a changing political climate.

Renters are adapting by doubling- or even tripling-up in apartments. This "Roommate Nation" phenomenon is a key driver behind today’s vacancy patterns.

Younger renters are moving back home or consolidating households, reducing the demand for single-occupancy units.

Turnover: The market rent divide

One critical distinction in today’s vacancy story is the difference in turnover rates between market-rent and below-market-rent apartments.

If you are at market rent, your annual turnover is probably approaching 30 per cent. If you’re significantly below market rents, turnover can be as low as five per cent.

In the past, apartment buildings averaged a 35 per cent turnover rate annually. Today, that figure has dropped significantly for below-market units. Long-term tenants are locking themselves in, particularly in older buildings with controlled rents.

These dynamics put downward pressure on turnover while creating challenges for landlords trying to capture market rents.

The A-B-Cs of vacancy risk

Understanding how vacancies impact different classes of apartments is critical for investors.

Historically, class-A apartments are the first to experience vacancy increases during an economic downturn. If the pressure is severe enough, the impact eventually reaches class-B. Class-C properties, however, tend to be more resilient due to their affordability.

Even though class-A gets hit first in a recession, it also rebounds the fastest during a recovery. This distinction is vital for investors assessing risk.

While class-C apartments offer stability during downturns, class-A properties provide faster returns when the market recovers — particularly if rental rates remain flexible.

The growing importance of apartment size

One emerging trend is the increased importance of apartment size. As more tenants share living spaces to combat rising housing costs, larger units are in greater demand.

Bachelor apartments are the first to be hit by vacancies, then one bedrooms. Two- and three-bedroom units, however, rarely experience the same vacancy pressures.

Larger units accommodate roommate-living more easily, making them attractive in today’s economic environment.

For landlords, this means reconsidering unit mix strategies to prioritize multi-bedroom apartments that can sustain demand during challenging market cycles.

The irony of today’s market

One of the ironies of today’s multifamily market is the reversal of conventional wisdom about unit size and tenant profiles.

Historically, larger units were reserved for higher-income tenants. Today, the opposite is true: the wealthiest tenants often occupy smaller one-bedroom units, while lower-income renters share larger spaces.

The rich person in the building has the one-bedroom, and the poorer tenants are sharing the three-bedroom.

This shift has practical implications for property management.

Higher turnover of shared units leads to increased wear and tear, greater staffing needs and additional operating costs. Furthermore, during property tours, the quality of furnishings and décor increasingly reflects the socioeconomic status of the tenants.

What this means for pro formas

For years, many apartment pro formas assumed a 1.5 per cent vacancy rate — a figure that felt conservative. But today, that projection is a reality, and rising vacancies suggest the number will climb higher.

Investors must rethink assumptions about vacancy rates and rent growth.

The shift toward shared living spaces makes certain apartment features — like privacy and independent living — a luxury. What tenants can’t share becomes a premium offering.

For landlords facing rising vacancies, the solution isn’t to resist the market reality — it’s to adapt to it. If it’s a race to the bottom, win the race!

What comes next

Landlords and investors must respond strategically to these evolving market dynamics. This means:

• Reassessing unit mix: Larger units remain in demand due to the roommate trend.
• Pricing strategically: Competitive pricing is essential to maintain occupancy.
• Operational readiness: Higher turnover requires more staffing and maintenance.

To learn more about how these trends impact your portfolio and discover actionable strategies to navigate rising vacancies, we are hosting a webinar: The Real Story on Vacancies and the Antidote for Cashflow on Thursday, April 3.

In today’s shifting market, knowledge is power - and adaptation is survival.