Filtering in Canada: The Price is Right?

Rent  spillovers: New buildings can lower rents in nearby older buildings by increasing housing supply.
Vacancy  chains: When someone moves into a new, higher-cost unit, they often leave behind a more affordable one, creating a chain of moves that opens up affordable housing.

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This research explores “filtering”, where new, more expensive homes free up older, more affordable ones. It examines how filtering works and its impact on housing affordability across Canada.

We studied 2 ways new rental buildings improve affordability in Canada:

Rent spillovers: New buildings can lower rents in nearby older buildings by increasing housing supply.
Vacancy chains: When someone moves into a new, higher-cost unit, they often leave behind a more affordable one, creating a chain of moves that opens up affordable housing.

Key highlights

New construction creates vacancies in affordable areas, making housing more accessible to lower-income households.
In Calgary, rents in nearby buildings dropped by 2–3% after new construction, but in Vancouver, rents were more stable.
Filtering is most effective in cities like Winnipeg, Montréal and Québec City, but less so in suburban areas like Oshawa and Barrie.

This research provides first-of-its-kind insights into how new housing supply can improve affordability. It highlights the importance of building new homes in high-demand areas to support lower-income households and improve affordability across the market.