Higher vacancies brought relief at the margins – but affordability remained stubbornly tight
Canada’s rental market, long defined by scarcity and bidding wars, shifted in 2025 as vacancy rates for purpose-built rentals rose to 3.1%, up from 2.2% in 2024 and above the national 10‑year average, according to Canada Mortgage and Housing Corporation’s (CMHC) latest Rental Market Report.
CMHC data showed purpose-built rentals became easier to find in most major centres, with national stock expanding even as demand from newcomers and international students eased.
Yet affordability pressures persisted: average rents for occupied 2‑bedroom units still rose 5.1%, driven in part by higher repricing at turnover.
“The tight conditions that defined rental markets in the past few years in Canada’s largest cities loosened in 2025. Historically high rental supply completions combined with weaker demand caused by slower population and economic growth led to a rise in vacancy rates in many large cities,” said Tania Bourassa‑Ochoa, CMHC’s deputy chief economist.
“Purpose‑built rental operators responded to these market conditions by offering incentives to new tenants, such as a month of free rent, moving allowances and signing bonuses. However, affordability is still a challenge in most markets, as the supply of units affordable to lower income households remains low.”
Regional fault lines in rental affordability
Conditions varied sharply by city. Toronto’s purpose‑built vacancy rate reached 3% for the first time since the pandemic, while Vancouver climbed to 3.7%, its highest level since 1988, as record completions and a weaker condo ownership market pushed more units into the rental pool.
Montreal’s vacancy rate rose, but average rents jumped 7.2%, outpacing income growth. Calgary’s vacancy held at 5% despite an 11% surge in supply, while Edmonton’s purpose‑built vacancies increased to 3.8% amid strong completions.
Canada’s rental supply story also had a longer build‑up. In 2024, purpose‑built rental stock grew 4.1% nationally, already pushing vacancy to 2.2% from 1.5% a year earlier.
More recently, private data tracked national vacancies edging higher to 3.6% in Q4 2024, underscoring how quickly new units came to market.
Immigration, demand and what comes next
For mortgage and housing professionals, the backdrop on population flows remains critical.
Bank of Montreal (BMO) senior economist Sal Guatieri said during a conference this year that lower immigration “will be a bit of a dampener on consumer spending and, of course, the housing markets and rental markets for a little while.”
In Toronto, fewer newcomers this year have helped push rents down and caused condo demand to drop. Moreover, according to “The Leaky Bucket 2025,” an impact paper by the Conference Board of Canada, one in five immigrants left the country within 25 years of landing, with the risk of departure peaking in the first five years.
In the past, new immigrants made up a large share of renters, encouraging investors to buy and rent out units.
Policy‑driven slowdowns in new arrivals, combined with rising youth unemployment, helped cool renter household formation in 2025.
For now, higher vacancies and softer turnover rents offer investors, lenders and policymakers a brief window to reset expectations.
But with average rents still rising faster than many households’ incomes, the central question for 2026 remains whether elevated construction, particularly at the more affordable end of the market, would be enough to turn a short‑term easing into lasting relief.
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