Canada needs 300,000 new rental units to avoid gap quadrupling by 2026: report

March 28, 2023, Canada – Canada’s rental housing shortage will quadruple to 120,000 units by 2026 without a significant boost in stock, Royal Bank of Canada said in a report Wednesday.

In order to reach the optimal vacancy rate of three per cent, the report suggested Canada would need to add 332,000 rental units over the next three years, which would mark an annual increase of 20 per cent compared with the 70,000 units built last year.

The research analyzed vacancy rate data released in January by the Canada Mortgage and Housing Corporation.

Canada’s vacancy rate fell to 1.9 per cent in 2022, its lowest point in 21 years, from 3.1 per cent in 2021.

Competition for units also drove the highest annual increase in rent growth on record, by 5.6 per cent for a two-bedroom unit.

Canada’s rental housing stock grew by 2.4 per cent in 2022, led by Calgary at 7.4 per cent and Ottawa-Gatineau at 5.5 per cent, while Toronto and Montreal saw the smallest percentage increases at 2.1 per cent and 1.4 per cent, respectively.

Slow growth in Canada’s two most populous cities has been outpaced by rapidly increasing demand, partly fuelled by high immigration levels, she said.

The report estimated an existing deficit of 25,000 to 30,000 units of rental stock across Canada. In addition to building more supply, it recommended turning condo units into rentals, converting commercial buildings and adding rental suites to existing homes to help ease the pressure.

This report by The Canadian Press was first published March 22, 2023.