A recent Royal LePage report highlights the financial strain on Canadian renters, revealing that nearly four in ten renters (36%) allocate up to 30% of their net income to rental costs. Additionally, 37% of renters spend between 31% and 50% of their income on rent, while 16% exceed the 50% threshold. In Canada’s most expensive housing markets, Vancouver and Toronto, the situation is more severe, with 27% and 19% of renters, respectively, spending more than half of their income on housing. In comparison, only 10% of Montreal renters face similar pressures.
The latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC) underscores the growing affordability crisis. In October 2023, the average rent for a two-bedroom unit had surged by 8.0% year-over-year, while vacancy rates plummeted to 1.5% for purpose-built rental buildings and 0.9% for condominium apartments.
“From coast to coast, Canadians are struggling with housing affordability in the wake of one of the most aggressive interest rate hike campaigns in history. Across many regions, rental demand vastly exceeds supply, making affordable housing a challenge. The housing industry and government must collaborate on innovative solutions to increase inventory, including rentals, and support those most impacted by these escalating market conditions,” said Phil Soper, CEO of Royal LePage.
The 2024 federal budget, released on April 16th, introduced several measures aimed at protecting tenants and facilitating home ownership. Notable initiatives include incentives for purpose-built rental buildings and the creation of the Canadian Renters’ Bill of Rights. This bill proposes a national standardized lease agreement, mandatory disclosure of a property’s rental price history, and a recommendation for financial institutions to report tenants’ rental payment history to credit bureaus, potentially improving their credit scores and strengthening future mortgage applications.
Compounding the issue, a recent IMF report indicates that housing affordability in Canada has deteriorated to its worst level in a generation. Elevated mortgage interest rates, rising rents, and high property prices continue to strain the housing market. Despite increased housing starts, builders face challenges such as a shortage of skilled labor, high financing costs, and regulatory barriers. The rental market is particularly impacted, with vacancy rates dropping to around 1% and rents skyrocketing, leaving many Canadians in a precarious financial situation.