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00:00:00

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

Canada’s rental market looks like it’s approaching a good balance, but you’re also saying it’s more complicated than that.

00:00:08

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

At the national level, we’re definitely seeing a new supply that has increased vacancy rates. Rents have been slowing down. However, if we look at the more recent segment, we’re definitely seeing in that segment a concentration of that easing, if I could put it that way.

00:00:28

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

What does the second half of 2026 look like?

00:00:32

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

There are a lot of units that are under construction right now. On the demand side, that is a little bit more positive, I think, because we are expecting to see rental demand pick back up slightly. Another interesting and important thing to mention is pent-up demand.

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00:00:51

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

You’re listening to In-House, Canada’s Housing Podcast, where we share the latest on Canada’s housing market.

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Asking rents are falling. Vacancies are rising in new, higher-priced units. Landlords are offering free rent, gift cards, and even cash bonuses just to fill them. It may appear as though our rental market is finally easing. So why do so many renters still feel stuck? That’s the question we’re going to explore in today’s episode. With me today is Tania Bourassa-Ochoa, one of CMHC’s Deputy Chief Economists. Welcome back to the studio, Tania.

00:01:33

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Thank you so much.

00:01:34

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

So when you were here in December, the rental market was starting to loosen after years of being very, very tight. And I think, from what I’ve read, the mid-year data really confirms that trend. But I’m hoping we can dive more into what the data is telling us. And before we do that, can you just give us a quick walk through of what the bigger picture is?

00:01:56

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[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Yes, of course. So the story has evolved quite a bit since last year. You know, for context, as you mentioned, the market has been easing. So our rental market has been hit by a double shock, if you will: a lot of supply coming online, and then, on the demand side, that has come down quite significantly. And so as a result, we’re seeing asking rents that are coming down across most of the centres in Canada. For the first time in many, many years, landlords are competing for tenants. And so we’re seeing a lot of these incentives like, you know, free rents, cash bonuses. I’ve seen, “We’re paying for you to move in.” So we’re paying for the whole moving component of it, TVs, you name it. So there’s a lot of creativity to be able to attract these tenants and also get them to sign the lease. Where it’s important to note is that this is happening, yes, across the market, but it is much more heavily concentrated in the newer, more expensive segments in the market. And so this is really where we’re seeing these… a lot more of these incentives and a lot more of this market that is easing.

00:03:26

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

I’m a little bit confused and I think that some of our viewers listening might also be confused. You mentioned that asking rents are falling, but you’re also kind of saying that rents are still going up. How are both of these things true at the same time?

00:03:46

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Yes, so when we say that rents are falling, what we’re really talking about are asking rents. So these are the rents that landlords are going to advertise for either a vacant unit or a unit that will become vacant. But for renters that are already renting or that are in their unit, their rent will most likely go up or has gone up at renewal, so it’s really a tale of two renters here. So on one side, you have existing renters that are seeing rents come up, but on the other side, you have these newer, new tenants that are, you know, seeing these asking rents come down on average. So if you are moving into a newer unit, you’re most likely going to pay more, but if you compare that average rent compared to previous years, that number is actually coming down. And so it does look very different in many regions. When we look at existing tenants and you look at regions like Halifax or Montréal, we’re seeing, you know, deterioration in affordability in many cases because we’re seeing rents coming up at a higher rate than their income or their wages. And so in these regions, affordability is actually coming down, but in other regions like for example in Toronto or in Vancouver where you know we have a lot of competition, the market is easing a lot more. For a tenant that is looking to go into the market, the market is actually looking closer to what it did pre-pandemic, so when we’re looking at the share of their income and what they will be paying for rent. And so there are some nuances to be made when we’re looking at different regions.

00:05:46

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

So now this is the part of the report that I want to spend a little bit more time on. On paper, Canada’s rental market looks like it’s approaching a good balance. But you’re also saying it’s more complicated than that. Can you break that down for us?

00:06:03

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Yes, of course. So, you know, at the national level, we’re definitely seeing, you know, a new supply that has increased vacancy rates, rents have been slowing down. So we’re seeing this market that is easing. However, if we look at the more recent segment, meaning like buildings that were built 2020 and more—so newer, more expensive units—we’re definitely seeing in that segment a concentration of that easing, if I could put it that way. So we’re seeing vacancy rates that are significantly higher, we’re seeing rents falling a lot faster, we’re also seeing tenant, sorry, mobility that is a lot greater in these segments. —When you look at the lower end of the market now—and so markets, segments that are more affordable—the picture looks very different. So vacancy rates did increase, but not by much. Mobility is still very limited, so tenants are not moving as much, and affordability hasn’t really improved in those segments. And so it’s really a very different picture. Now, when we’re looking at this newer… segment, if you will, we’re talking about a lot of competition. There are a lot more units that are going to be coming online in the next 12 to 18 months. When we look at everything that is currently under construction, you know, conditions might be easing quite a lot, but it may continue to be that way in the next few years. An interesting thing to point out is that because, so we mentioned that mobility was higher in this newer segment. Understandable, right? You know, like, with all these attractive incentives, it is, you know, successfully attracting new tenants and so they’re able to get them to sign. However, at renewal, we’re seeing that a lot of these tenants are not necessarily renewing. You know, they might be looking for other attractive incentives elsewhere, and so they’re a lot more mobile. And so when we now look at the market thinking with the landlord in mind, I think we focused a lot on attracting these new tenants, but retention strategies are going to be very important. So how do you attract but keep these tenants in the buildings because turnovers can be very, very costly.

00:08:45

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[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

Yeah, there’s someone I know that’s renting, and they got, like, free internet for like a year. They had to lock into a particular, like, company, but that’s still such an amazing incentive. They got, like, free rent, free move-in costs, free parking for a certain amount of time, and then also now free Wi-Fi. Let’s dive into that—the 3% rule. So from what I’ve read, the 3% rate has long been kind of that rule of thumb to really showcase that the rental market is balanced. But I think you’re going to tell me that that benchmark does not work the same everywhere based on what I read in the report. So this is new thinking, right?

00:09:35

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Well, not really new thinking. I mean, we’ve always been aware of this. So if you look at the media or the industry, you’re right. They’ve always referenced this 3% as a balanced vacancy rate. So we’ve done a lot of, well, we’ve done some work, and we’re doing a lot more work, to kind of identify what that balanced vacancy rate looks like across the different regions. And so what we find is not surprising, but we find that a balanced vacancy rate does not look the same across the different CMAs in Canada. It does not look the same across different time periods. And it’s not a unique point but rather a range, so it’s a range that, again, looks very different from region to region. One of the ways to measure it, so this is what we’re presenting in the report today, but keep in mind that there’s a lot of different ways that we could use to calculate what a balance—or estimate what a balanced vacancy rate looks lik—is by looking at rents and seeing where… when rents are nearing inflation growth, and so that gives us an indication that the vacancy rate is in a balanced range. What we find is that in regions like in Toronto or Vancouver, the balanced range is, you know, maybe across, they’re all around 3%, but maybe a little bit lower. But when you look at regions like, for example, Edmonton, or Calgary, this balanced range is actually a little bit higher. So there’s a little bit more volatility. We could see rent spikes happen a little bit more in these markets. And then when you look at markets like Halifax or Montréal, we’re a little bit closer to that 3% range. So one of the findings is that, across the country, we are approaching or near or within these balanced ranges. If you look at Halifax, however, we’re maybe a little bit more on the tighter side of the market, and when you look at Vancouver, for example, in that case, we’re right now a little bit above that balanced vacancy rate, so we might be closer to a market that is easing. I do want to caveat, however, a few things. So I did mention that this is one of many methods to estimate a balanced vacancy rate so there are other ways of looking at that and we will be sharing those in the months, quarters, years to come. Second of all, we talked about vacancy rates and we talked about how that looks like compared to rents. Vacancy rates and rents don’t tell the full story. There are other elements like people that are underhoused, that are overhoused. We’re not talking about if the housing is reflective of the housing needs of the people that are living in these rental units. So there’s a lot of different elements that are… that could be taken into account. So we’re really looking at these two measures, but keep in mind it doesn’t tell the full story. And then finally, these are for the overall market, because we did mention that certain segments are experiencing either tighter conditions or conditions that look a lot more eased.

00:13:17

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

So that’s actually a really great segue into kind of my next question. I wanted to take a deeper dive regionally. Let’s start with which markets are easing across Canada.

00:13:27

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Yes, so definitely Toronto, we’re seeing asking rents that have been coming down since last year, but that number is coming down a little bit more significantly this year. A lot of condos that are being put out for rent, so that is creating a lot of competition for the purpose-built rental segment, so that’s adding a lot of supply to the market. Vancouver as well is also in that category. You know, Vancouver, we are observing a vacancy rate that we haven’t seen in over 30 years, so we’re really in these conditions that are a lot more eased than what we’ve seen in previous years. Again, asking rents that are declining quite significantly there. So much so that we are actually reaching these pre-pandemic levels when you’re looking at these newer tenants that are coming into the market. So levels that are maybe a little bit more comparable.

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Calgary is another place where we’re seeing these asking rents falling, and we’re also seeing mobility quite high across the different rent ranges, which is quite different than what we’re seeing in different regions in Canada. And then Ottawa, which has newly joined the falling asking rent group as of spring 2025.

00:14:58

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

And which markets are we seeing ongoing pressure in the rental market?

00:15:02

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Yes, so there are a few. Halifax, which is definitely, like we mentioned a little bit earlier when talking about that balance vacancy rate, asking rents are a lot more stable. So yes, they’re not increasing, but they’re a lot more stable. Affordability, however, is still deteriorating, so when we’re seeing rent increases compared to incomes, you know, that math is pushing affordability to lower levels in that region. It’s actually approaching Toronto levels. In Montréal, rents are still increasing for existing tenants, and again, to a higher degree than what we’ve seen in other regions. And in lower rent segments, I think it’s important to say that is true across the board in more affordable rent ranges… that the story is different, like we mentioned a little bit earlier, so still a lot of affordability issues there and conditions that are a lot tighter.

00:16:06

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

So Tania, for the renters and the policymakers out there who are listening to this podcast, what does the second half of 2026 look like? What are we watching carefully?

00:16:19

[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

Yes, so there are a few things to look at for sure. So on one side, supply. There are a lot of units that are under construction right now. We estimate that the bulk of these units will be coming online and be completed in the next 12 to 18 months, but mostly the next 12 months, so a lot of supply that will be coming online. On the demand side, that is a little bit more positive, I think, because we are expecting to see rental demand pick back up slightly. On one hand, with the recent immigration targets, we’ve kind of hit… 2026 was like the lowest growth rate in terms of population in many, many years. But as we look forward, we’re expecting to see population growth pick back up, because in some regions we had actually seen decreases in population, so seeing growth pick back up on that side. And then, another interesting and important thing to mention is pent-up demand. And so, with housing affordability having deteriorated so much in the last decade or so, we have observed that there’s been some suppressed household formation going on. So basically, households that were supposed to form, like young adults leaving the family nest, for example, or, you know, moving out of with their roommates, for example, we didn’t see a lot of households being created. And so with affordability that is improving with rents that are coming down, we might see some of that latent demand, that demand that has been kind of building up in the back, come back out. Another element to take note is the condo segment. So in regions like Toronto and Vancouver, we know that they’ve created a lot of competition to the purpose-built rental market. Sorry. Third element. Another element to take into account is the condo segment. So we know in Toronto and Vancouver that segment has created a lot of competition to the purpose-built rentals, you know, and that’s because a lot of new condo supply has been coming online over the last few years, supply that has been piling up. But now there’s not a lot of housing starts in that segment, and so we can expect to see less condos that will be competing with the purpose-built rental segments, especially in those markets. So in the end, what does that mean? So looking forward, yes, we’re expecting markets to continue easing, you know, a lot more concentrated in the newer builds, especially taking into account all of these new units that will be arriving on the market. There is a risk because developers are finding it a lot harder to making it financially viable to push out new projects. There is more risk in this newer unit segment. And so there is a risk that developers take their foot off the pedal and that that limit new rental supply that will be coming into the market in the years to come. Now, thinking about demand, thinking about rental demand picking back up, there’s a risk that we’d be facing housing supply shortages in the years to come, and so all of these affordability gains that we’ve done over the last years, that could potentially undermine those gains. I do want to finish on a positive note because we have observed some interesting trends when looking into the data. We talked about mobility. Tenants are moving more than they used to before, a lot more in the newer segment, but they are moving a little bit more across the ranges. And also vacancy rates have increased across all the ranges. And so even in the lower end of the market, yes, they’re not… vacancy rates are still very tight, but they have increased for the first time in many, many years. And so this is indicating that filtering is actually starting to potentially occur, that these vacancy chains are actually happening. So in other words, these newer units, even if they’re more expensive, they’re attracting new tenants and so that is kind of cascading down into the entire spectrum. Granted, it takes time and it will continue to take time, but these early signs are still a positive indication that we have moved in the right direction.

00:21:34

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

So thank you, Tanya, for breaking down kind of the key findings of our Rental Market Report, like the update to the full Rental Market Report that we put out in December of last year. And at the top of this episode, I asked one question. Why do so many renters still feel stuck? And because of the very detailed answers that you’ve given us today, I think we have our answer. So thank you so much. Looking forward to having you back in the studio in December so we can see what happens in the last six months of the year. 

00:22:07

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[Speaker: Tania Bourassa-Ochoa, Deputy Chief Economist - CMHC]

It’s always great to have these conversations with you. Thank you.

00:22:11

[Speaker: Joelle Hamilton, Communications & Marketing - CMHC]

And I’d like to take a moment also to thank our listeners today for joining us In-House. Catch you next time.

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