Canada's rental housing shortage will likely quadruple in three years, new report says
Canada’s rental housing shortage is anticipated to quadruple to 120,000 units by 2026 without a significant boost in current inventory levels, according to a new report by Royal Bank of Canada.
This is despite Canada’s purpose-built rental housing construction levels last year rising at their fastest pace (2.4%) since 2014.
“Vacancy rates nevertheless fell to a two-decade low as high levels of in-migration and the loss of housing affordability sparked a record surge in both demand and rents,” RBC said in its latest market analysis.
Toronto and Montreal, which RBC described as the urban areas that are most likely to see the greatest increases in demand due to surging immigration, registered the smallest growth in supply last year.
“The latter urban centres are among the most popular destinations for newcomers, welcoming an estimated 32% and 10% of international immigrants respectively last year,” RBC said. “The slow growth in rentals in these cities will be especially problematic as demand for rented accommodation continues to outgrow supply.”
The potential of these trends to exacerbate the availability and affordability situation in the Canadian housing market cannot be overstated, the report said.
“This will tip the housing market into a greater state of imbalance and drive the optimal vacancy rate of 3% even further out of reach,” RBC said. “With Canada’s immigration targets set at record levels and affordability poised to remain stretched, the pressure isn’t likely to let up.”
And while converting unused commercial structures into more condo apartment units could alleviate some of the pressure, “these responses are unlikely to be enough,” RBC warned. “The best way to meet current and future demand, as well as provide stability (and hopefully greater affordability) in the rental market is to considerably grow the supply of purpose-built rentals.”