More and more Canadians are renters. And their numbers will only go up.

That’s because sky-high home prices have crushed many home-ownership dreams, especially in Vancouver and Toronto.

But there are mounting issues with renting as well. Rental vacancy rates are at historic lows in Canada’s large cities, and rents are climbing faster than inflation. Average rent for a two-bedroom apartment last year rose 6.3% in Vancouver and 4.5% in Toronto.

The solution is to boost rental supply—a lot. There are reasons to be optimistic about Montreal and Vancouver, where strong apartment and condo construction will send a wave of new rental units to market over the next couple of years. Toronto is a different story. Despite purpose-built apartment construction rising four-fold since 2014, there’s a shortfall of some 9,100 rental units, and supply is unlikely to come close to demand in the coming years. The pace of new supply must at least double to stabilize rent.

Read the Full Report


What’s needed in the Toronto area is a deliberate policy to boost rental supply. The Ontario government’s More Housing, More Choice—which, among other things, promises to cut red tape to speed up construction approval—is a step in the right direction.

But to really make things happen, the policy scale must be tipped in favour of building new rental supply. This could mean sweetening existing construction funding programs, offering new incentives (e.g. development charge rebates) or other creative proposals. It would also make sense to regulate short-term rentals, like Airbnb, that have diverted some rental housing away from long-term renters.

At a minimum, new policy should set multi-year supply targets across the entire housing spectrum, and provide annual progress reports, just as the City of Vancouver has done since 2017. Even if the prospect of owning a home is elusive, having access to rentals shouldn’t be.

Robert Hogue is a member of the Macroeconomic and Regional Analysis Group, with RBC Economics. He is responsible for providing analysis and forecasts for the Canadian housing market and for the provincial economies. His publications include Housing Trends and Affordability, Provincial Outlook and provincial budget commentaries.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.