2026 Mid-Year Rental Market Update

Asking rents decline due to rising supply and slowing demand

Asking rents¹, the rents advertised for available units, are continuing to decline in Toronto, Vancouver and Calgary. However, declines were less pronounced in Q4 2025 compared to a year ago. Ottawa has now joined this group, with asking rents declining since Q2 2025. Halifax recently showed more stability in asking rents after previous declines. Montréal and Edmonton showed little change (Figure 1).

In major markets, landlords report that increased competition from new supply is the primary driver of lower asking rents. In Toronto and Vancouver, they also pointed to increased competition from a surge in newly completed condominium apartments rented out, many of which couldn’t be absorbed in the ownership market. Supply is now outpacing demand for these new units.

In response, landlords increasingly rely on incentives to attract tenants, along with lowering asking rents. Market intelligence suggests these incentives have intensified over the past 6 months, reaching as high as several months of free rent. They now often include:

• free or discounted parking
• gift cards
• move-in credits
• and in some cases, cash bonuses

Landlords continued to increase rents paid on occupied units

The average rents paid by all tenants continued to increase, driven mainly by higher rents at turnover. In markets with persistently low turnover and rent increase guidelines, landlords are still able to significantly increase rents once a unit becomes available.

In the first quarter of 2026, 2-bedroom units continued to post average rent increases compared to a year ago, apart from Toronto where gains remained modest.²

Higher vacancies in newly completed units

Rental apartment completions in early 2026 are tracking above the same period in 2025. According to CMHC’s Rental Market Survey, vacancies were highest in structures built after 2020 and in units located near post-secondary institutions. In contrast, older stabilized buildings and family-sized units continue to experience tighter market conditions. Market intelligence suggests this trend has intensified since our fall survey.

As a result, there is a short-term imbalance between supply and demand in new, higher-priced segments. Rental operators are reporting that new units are taking longer to rent. In some cases, it can take months to fill a vacant unit.

Competition from investor-owned rental condominium apartments, which is higher than usual, is further slowing absorption in larger markets. While currently a significant factor, this source of competition will decline in the coming years as condominium apartment completions are projected to fall sharply.

This is providing renters with more choice and some negotiating room. Although average rents continue to increase on occupied units and at turnover, current vacancy levels suggest more balanced conditions in Canada’s largest rental markets.  Asking rents are also easing, which supports this view.  

This raises an important question: What level of vacancy defines a balanced market?

Redefining a balanced vacancy rate

A vacancy rate of 3% has long served as an industry threshold for rental market balance. However, our analysis shows that this threshold doesn’t hold across all markets and different time periods. This variation reflects differences in:

• construction ease
• local economic conditions
• rent regulations, and
• rental stock composition

The balanced range is the vacancy rate where rent growth, after inflation, is near zero. When the vacancy rate falls below this range, average rent tends to rise faster than inflation, sometimes sharply. When the rate rises above it, rent changes tend to fall below inflation³.

Preliminary analysis suggests that most major markets are now within, or near, their historical ranges associated with balanced conditions. Notably, Vancouver was sitting just above its balanced market range as of 2025, while Halifax was sitting just below (Figure 2).

Our preliminary results show the following for major Canadian rental markets:

• Calgary and Edmonton: These markets require higher vacancy rates before average rents stabilize. Below that threshold, the market tightens quickly, and rents rise sharply. Historically, these census metropolitan areas (CMAs) have shown wider volatility. 
• In Vancouver and Toronto: Rents stabilized at lower vacancy levels. Even small increases in the vacancy rate can meaningfully reduce average rent pressure. This is consistent with ongoing supply constraints relative to demand. 
• Montreal, Ottawa and Halifax: These markets had less volatility and more gradual transitions between tight and soft market conditions.

Supply growth resulting in some relief for new renters amid ongoing affordability strain

In Q1 2026, affordability for existing tenants⁴ has worsened across most key markets as compared to a year ago. Edmonton and Toronto are the exceptions, where a combination of slower rent growth due to higher supply and strong wage growth has led to improved affordability.

Calgary and Halifax stand out for experiencing the most significant deterioration in recent years. Affordability ratios in these markets are now approaching levels currently seen in Toronto.

This upward movement in average rents contrasts with improving conditions for tenants signing new leases. Asking rent-to-income ratios⁵ generally declined across most major CMAs. This was driven primarily by stalling or declining asking rents responding to softer leasing conditions.  The most pronounced drops were in Vancouver, Toronto, Calgary and Edmonton. Vancouver and Toronto ratios are now back to pre-pandemic levels. This improvement suggests that recent supply growth is resulting in modest affordability gains and more options in select market segments.

Tenant mobility remains uneven across rent quartiles

CMHC’s Rental Market Survey indicates vacancy rates have risen across all rent quartiles. Meanwhile, rental operators are reporting greater competition from new developments and tenants more willing to move for incentives. This suggests that new high-end supply was drawing in higher-income renters and potentially freeing up lower-priced units.

Overall, our analysis shows that tenant turnover was the highest among the most expensive rent quartiles, and much lower for the most affordable rent quartiles. Between 2024 and 2025, turnover rates did generally increase in lower rent quartiles. However, vacancy rates remained very low, and conditions varied by market (Figure 3):

• In Toronto and Vancouver: Vacancy and turnover increased across most rent quartiles. Pressure remained in the lowest segments, particularly in the persistently tight first-quartile. This suggests limited downward filtering of new supply.
• Calgary and Edmonton: High vacancy and turnover across all quartiles. This demonstrates how periods of strong supply growth can broaden renter mobility throughout the market.
• Montréal and Halifax: These markets diverged from these trends. Vacancies rose and turnover declined in most rent quartiles, indicating that while more units became available, tenants were less responsive or willing to move.

Renter household formation expected to continue

Despite weak population growth and elevated unemployment rates, rental demand in major cities is expected to be supported by:

• improving affordability for new tenants
• return-to-office trends, and
• large young-adult cohorts seeking independence

Household formation will continue in 2026 (Figure 4). It will be led by younger cohorts, who are more likely to rent. This is especially true amid economic uncertainty and lower costs compared to ownership. Notably, easing housing costs are expected to support growth in Toronto and Vancouver. This will enable previously suppressed households to form.

This Rental Market Update Report provides an update on rental market conditions across Canada building on insights from our 2025 Rental Market Report. It also includes insights obtained through market intelligence from industry experts.