rennie landscape - spring 2024 edition

housing

05. housing

Canada’s undersupplied purpose-built rental markets are not only facing challenges of low vacancy rates and quickly-rising rents, but there are incentives for renters not to move—even if their home no longer suits their needs.

SHOULD I STAY OR SHOULD I GO NOW?

The purpose-built rental market has been long neglected in most of the major metro areas in Canada since the 1980’s. Only recently has new construction on purpose-built rental picked back up in a major way, with some exceptions (looking at you, Montréal). And while the secondary rental market— individual condo owners renting out their properties—has filled some of the gap left The overall vacancy rate in major metros in Canada (per CMHC’s definition) hit an all-time low in 2023 at just 1.5%. And those low vacancy rates lead to significant rent growth, with the average rent for a two- bedroom nationally (regardless of whether it was a turned over unit or a continuation of tenancy) growing by 8.0% last year. by the purpose-built market, overall conditions remain extremely tight.

But there are other symptoms of an undersupplied rental market today beyond low vacancy and rising rents, and one of those is low turnover rates. Markets with some of the highest rents (and rent controls on raising those rents within a tenancy) have some of the lowest turnover rates. That makes sense, when rents are rising quickly. As long as a tenant stays in their apartment, they are insulated from current market rents. This leads to a correlation between low turnover rates and greater differences in average rents between turned over and non-turned over units. Here in Metro Vancouver, where vacancy is the lowest in the country at 0.9%, we also have the lowest turnover rate at 8.1% and that’s a big reason why turned over units rented for 25% more than non-turned over units last year. This is a strong incentive for renters to stay in their homes, even if their needs change and leads to further imbalance in the rental market.

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