Why rent is so expensive in Canadian cities (that aren’t Toronto or Vancouver)

When rent goes up, it often goes up most dramatically in major urban centers. And, sure enough, Toronto and Vancouver have consistently been in the spotlight as rental prices have skyrocketed over the last year. A two-bedroom apartment in the Ontario capital averaged $1,765 a month in 2022, while the same place in Vancouver soared to $2,002, according to the latest Canada Mortgage and Housing Corporation (CMHC).

But it isn’t just a problem for Canada’s biggest cities.

Across the country, high-interest rates have left would-be homeowners renting rather than buying, driving up demand in the rental market. Stable youth employment has also boosted demand, as has an uptick in net migration, the report said, given that young people and new immigrants tend to rent rather than buy.

But every region has its own unique factors driving up the cost of rent, from an improved economy in the West to the impact of students returning to campus in college towns.

Here’s a look at what’s happening in some of those other rental markets.

Calgary

Janice Rourke, 67, recently received a notice that rent in her downtown apartment was going up nearly 24 per cent, an increase it blamed on the rising price of utilities, maintenance and other costs. (Alberta doesn’t have a cap on rent increases, though it does limit how often rent can be raised.)

“That was a huge surprise, when I saw the amount,” said Rourke, who is currently between jobs and said it will be a struggle to afford the new monthly bill.

She’s considered searching for a less expensive place, but says the prices of nearby apartments haven’t been much better.

In Calgary, the average price of a two-bedroom rental apartment grew six per cent last year to $1,466 a month, according to the CMHC.

“It’s getting harder and harder to find safe, affordable accommodation,” said Rourke.

Existing tenants like Rourke and those on the hunt for a first apartment are facing a tight rental market in Calgary these days. Last year, the city’s vacancy rate for purpose-built rentals dropped to 2.7 per cent, its lowest since 2014 when the previous oil boom of the early 2010s lured many people to Alberta.

Rental demand has, this time, again been buoyed by a record-high level of immigration and an uptick in “in-migration” — people moving to the province from elsewhere in Canada — lured by Alberta’s relative affordability and available jobs.

“This [provincial migration] is significant, because we haven’t seen this for a lot of years,” said Michael Mak, CMHC’s analyst for the region.

What makes today different from previous boom times, Mak said, is that the current economic growth isn’t entirely linked to strong commodity prices, though those certainly played a role. Employment has also grown in other sectors, especially technology.

“Nowadays, it’s a much more diversified economy,” said Mak.

Kitchener-Cambridge-Waterloo

The rental market in Kitchener-Cambridge-Waterloo, a cluster of three small cities some 90 kilometres southwest of Toronto, has been tight for several years, with a vacancy rate hovering around two per cent. In 2022, it dipped even further to 1.2 per cent, the region’s lowest in two decades.

Meanwhile, apartment rental prices grew by more than seven per cent — faster growth than the nearby markets of Toronto, Guelph and London, according to the CMHC report. The average price for a two-bedroom rental is now $1,469.

Sana Banu, a recent graduate of Conestoga College and president of the students’ union, recalls moving to the region in 2018 as an international student and easily finding a room to rent near the Kitchener campus.

“[Today,] there is no availability anymore within the vicinity of the campus,” said Banu.

The return of students to campus, after so much remote learning during the pandemic, has been among the drivers of the tight rental market, according to CMHC. The region is home to Conestoga College, Wilfrid Laurier University and the University of Waterloo.

While all students contribute to demand for rentals, Banu says international students are less likely than domestic students to have family near campus, and more likely to rent while they study.

The number of international students studying in Canada has been on the rise for years, and while their numbers dipped during the outset of the pandemic, the CMHC says there’s since been a “strong rebound” of study permits issued in Ontario.   

The CMHC report says a surge in permanent resident admissions in the region has also likely contributed to demand for rentals, as has employment growth in its high-tech sector.

As rental options become fewer and farther between, Banu says more students are commuting from outside the region, couch surfing or piling multiple roommates into the same bedroom. As students become more desperate, she’s also concerned they’ll also be more likely to fall for rental scams.

“There is not enough supply for the demand that we have right now,” she said.

Halifax

Both international and, increasingly, inter-provincial migration have contributed to high demand for rentals in Halifax. Nova Scotia gained 17,319 people from international migration and 14,079 from within Canada between July 2021 and July 2022, according to the province’s Department of Finance.

Halifax’s recent surge of in-migrants has been due to the province’s relatively low cost of housing and its reputation for handling the pandemic, along with the growing ability of workers to do their jobs remotely, according to the city’s economic development agency.

The CMHC report says in-migrants are generally less likely to rent and more likely to purchase homes, though this, too, has contributed to the high cost of renting.

“Local residents are having to stay in rentals longer just so that they can step up to buy a home,” said Kelvin Ndoro, CMHC’s analyst for the region.

After trending down for the last few years, the vacancy rate in Halifax held steady in 2022 at one per cent, said Ndoro. Meanwhile, the cost of rent shot up by roughly nine per cent, to an average of $1,449 for a two-bedroom apartment.

Amid that record-low vacancy rate, Chris Ryan, a Halifax property manager, says he gets between three to five inquiries a day from people asking if he has any inventory available.

“We’re just growing at a pace that real estate hasn’t caught up to yet,” he said.

Halifax, like Kitchener-Waterloo-Cambridge, has an abundance of post-secondary schools. And the post-pandemic return of students to campus — and international students in particular — has contributed to demand for rentals, the CMHC report noted.

International student enrolment has been on the rise there for years (aside from a dip during the pandemic), according to data from the Halifax Partnership. The economic development agency says the share of international students attending university in Halifax has grown from about 14 per cent of enrolments in 2011-12, to about 23 per cent in 2021-22.

Kyle Cook, vice-president of advocacy for the Saint Mary’s University Student Association, says the lack of student housing has left some in a precarious position.

“Often we’re hearing … that students are renting out their living rooms, hallways,and sometimes having to share two to three people in one room,” said Cook. “It’s something that is very common, especially over the last few years since COVID.”

As more people move into Halifax, others have left for nearby communities, in search of a more affordable place to live, Ndoro says.

Some young people are opting out of the rental market altogether, he said, instead choosing to live with their parents to save money.

Urgent need

There are differences in what’s fuelling rental demand throughout Canada, but also plenty of similarities. As interest rates go up, it becomes more difficult to buy, pushing more people to rent for longer.

People are also moving into Canada and within it — whether for school, work or in search of an affordable place to live — leading to heightened demand in various markets, even those where inexpensive apartments have historically been fairly easy to find.

There is also one major similarity in what is expected to solve the affordability problem: more housing supply.

“[The results of this report] reinforce the urgent need to accelerate housing supply and address supply gaps to improve housing affordability for Canadians,” the CMHC report said.