Rents will continue to rise this year in most Canadian cities: Rental Market Report
According to the fourth annual Rentals.ca Rental Market Predictions Report, despite the enactment of housing programs and policies at federal, provincial and municipal levels, rents in many Canadian cities will continue to rise in 2022.
“The daily pandemic news put the housing crisis in the background for a while,” said Matt Danison, CEO of Rentals.ca Network, “But now as COVID-19 recedes, we are talking again about our lack of supply. This problem will keep rents on the rise in most of Canada for the rest of the year.”
The forecast calls for Toronto average monthly rents to bounce back 11 per cent by the end of the year; Mississauga monthly rents will be up 7 per cent by December; Vancouver average rents will increase 6 per cent; Montreal will post an annual increase of 5 per cent and Calgary rents will go up 4 per cent annually, according to Ben Myers, president of Bullpen Research & Consulting.
Max Steinman, CEO of Rentsync, believes we could continue to see these trends affecting renters in 2022:
- Vacancy rates will continue to drop as supply cannot keep pace with demand.
- Rents will continue to increase in most markets as a result of supply issues
- Millennials will continue to migrate to secondary markets, as employers must stay flexible or face losing their competitiveness in the employment market.
- Tighter supply will become a bigger issue in secondary markets accelerating rental rates even greater than in primary markets.
Steinman would like to see more office space converted to residential projects to address both the under-supply of residential and the over-supply of commercial space. He believes if municipalities would cut the bureaucratic process to make these conversions happen faster, downtown cores would be rejuvenated, enabling retail (restaurants & shopping) to thrive post-pandemic.
Jennifer Hunt, an international real estate investment expert, and chief intelligence officer at the Real Estate Wealth Lab, believes, “rents will rise in nearly all markets in North America over the next 10 years.”
She says Canada needs unprecedented construction levels to address the supply problem. She says construction has been slowed by among other things supply chain disruptions, government-imposed restrictions in response to COVID-19, lumber costs and inflation. Also, she says, municipal governments need to approve zoning and by-law changes to accommodate a faster construction pace.
Among the final thoughts in the report for the rental market for the rest of the year are:
- As much as the country needs more supply, is Canada’s Budget 2022 $10 billion plan to redouble housing construction realistic? Think supply chain issues, lack of skilled workers and inflation for starters. And while the ambitious plan hits housing woes on many fronts, it will take time before Canadians see tangible results.
- The pandemic has changed the types of amenities renters are looking for in their new units. Some of the most desirable features post-pandemic are: pet-friendly units, a washer and dryer, more space for cooking, a backyard, a second bedroom for office space, partially furnished units, co-working spaces and refrigerated delivery rooms for groceries.
- Downtowns might have thinned out some during the pandemic, but as offices, restaurants, bars, stores and venues reopen, renters are drifting back to city centres where rents are increasing.
- But some who have moved to smaller cities for cheaper rents, more space and a lifestyle change are staying, causing rents to continue rising in smaller urban centres.
- The pandemic accelerated the work-from-home phenomenon, and it’s here to stay, even if partially for some businesses. Companies will be shedding some office space as a result. How long will it take cities to rezone to convert some of this space into lofts for work, live, shop and play areas?
- Will Baby Boomers begin moving and downsizing again or remain aging in place?
- A lot of tax dollars have been spent to fix homelessness in Canadian cities, and yet it continues to be a problem. Why don’t cities look to Medicine Hat, the municipality that has functionally ended chronic homelessness?
- As supply becomes more of an issue, get used to hearing more about: lot-splitting, filling in the middle or infill, as of right zoning, inclusionary zoning, laneway suites and garden suites and co-op housing.
For the Toronto rental market analysis, Rentals.ca relied on the insights and perspective of Tony Irwin, president and CEO of the Federation of Rental-housing Providers of Ontario (FRPO), and Dana Senagama, senior specialist CMHC — Market Insights.
“We need to get all types of rentals built. We’re starting to see more projects in the pipeline, but we need action from all levels of government” to help solve the problem, says Irwin.
Irwin believes in building infill development on existing sites, reduction in taxes and fees on rental projects and as-of-right, or adequate zoning in key areas such as transit corridors.
“Demand in the purpose-built rental market continued to be adversely affected by the pandemic, while demand for condominium rentals returned to pre-pandemic levels,” says Senagama.