CMHC's 2022 rental market report
Metro Vancouver's vacancy rate is still well below 3%.
CMHC publishes a Rental Market Report each year, describing rental markets in metro areas across the country. The latest report, describing the market in October 2022, was released last Thursday.
I made the chart above using the vacancy rates from the 2021 and 2022 reports. A vacancy rate of 3% is healthy: below that, rents rise quickly, forcing people out. You can see that Vancouver’s way below that (less than 1%). Vacancy rates in Edmonton and Calgary are down compared to 2021, but Edmonton’s is still above 3% and Calgary not far below. Toronto is below 2%, as are a number of other metro areas in Ontario. Montreal is down from 3% to 2%. Halifax is at 1%.
This data is for apartments in rental buildings (“purpose-built rentals”); it doesn’t include condos and basement suites which are rented out by individual owners. CMHC reports that in Metro Vancouver, condo rentals account for 42.5% of all rentals, and that last year enough condos were added to the long-term rental market (7800 condo rentals, vs. 3800 purpose-built rentals) to increase the vacancy rate for condo rentals from 0.8% to 2.2% - still well below 3%.
As long as vacancy rates are so low and rents are so high, we need to keep pushing to build more rental housing.
Demand outpacing supply
Metro Vancouver added 3800 purpose-built rentals, increasing supply by 3.3%. But demand, measured by the increase in occupied purpose-built rentals, increased by about 3.6%.
The graph above only shows the purpose-built rental market (apartment buildings). In Metro Vancouver, condos make up about 40% of the rental market, and 7800 condos were added to the long-term rental market. This brought up the vacancy rate for condo rentals from 0.8% to 2.2%, still below 3%.
The gap between supply and demand in Toronto looks even worse. Edmonton and Calgary also saw demand outpacing supply, but they were starting with considerably higher vacancy rates (7.3% in Edmonton, 5.1% in Calgary).
When Covid hit in 2020, suddenly there were lot more people working from home. People moved out of the most expensive cities, since they were no longer tethered to the office; in 2020, asking rents in Toronto dropped by 20%. On top of that, travel restrictions temporarily brought international migration (including international students) to a halt.
From a nationwide point of view, though, total demand for residential space increased: people working from home needed more space. Now international migration is increasing as travel restrictions are lifted, a rebound in employment for younger workers (who typically rent) means that they’re looking for rentals as well, and high interest rates mean that prospective homebuyers are continuing to rent.
Market rents rising
When there isn't enough housing to go around, high prices and rents are how people get pushed out. Kevin Erdmann:
The apparent unsustainability of high home prices has been a central concern in housing policy debates for the past couple of decades. Prices are unsustainably high. Lenders, corporate investors, the Federal Reserve, and a number of other entities frequently have been blamed for this condition. However, it is constrained urban supply that causes home prices to be unsustainably high, because prices must be unsustainably high in order to induce existing residents to give up, choose to be displaced to relieve their financial burdens, and move to other cities.
There’s a widening gap between current rents (which are limited by rent control) and market rents. For purpose-built 2BR rentals in Metro Vancouver, the average rent increase between 2021 and 2022 was 4% for apartments where the tenant remained the same, but 24% for apartments with a new tenant.
Across Metro Vancouver, the average asking rent for a 2BR apartment is $2900.
For all rentals, regardless of size:
Affordability for low-income renters
A table showing just how badly the bottom 20% by income is squeezed, basically everywhere except Quebec. (If you compare Montreal and Toronto, it’s a lot easier to build housing in Montreal.)
What we need: more housing
Despite the increase in rentals, in Metro Vancouver we’re not even keeping up with demand, let alone catching up with the past shortage. Unfortunately, sharply higher interest rates and rising costs mean that economic viability is even more of a bottleneck - the increase in costs acts as a brake, since fewer projects are economically viable.
Ways to compensate:
relax height restrictions
reduce development fees (which also act like a brake)
provide low-cost loans to build rental housing like RCFI
provide counter-cyclical investment in non-market housing
In BC, people are willing to pay more for condos than for rentals. So if the high-cost, high-interest-rate environment continues, it may be easier for condo projects to go ahead than rental projects.
Links:
Introductory Twitter thread from CMHC
Justin McElroy, CBC News: Rents in B.C. continue to be highest in the country, says yearly federal report
Data tables. CMHC’s rental market statistics summary for Metro Vancouver, by neighbourhood.
Reports from 2021 and 2020. 2019 report for Vancouver (there used to be separate reports for each metro area). All past reports, via the CMHC’s Housing Knowledge Centre.