• Vacancy rates for purpose-built apartments rose to 2.2% in 2024 from a record low of 1.5% in 2023, leading average rent growth to slow to 5.4% from a historic peak of 8% in 2023.
  • Declining population growth and softening labour markets are easing demand for units. A surge in rental completions has also helped bring the market closer to balance.
  • Rent growth has eased most in more expensive provinces of Ontario and British Columbia, where apartment turnover rates were lowest.

Canada’s rental market eased slightly in 2024 after a year of unprecedented tightness, but affordability challenges persist.

At 2.2%, Canada’s rental vacancy rate remained below the 3% threshold for balance, indicating shortages persisted in 2024. Rent for an average purpose-built two-bedroom apartment was up 5.4% in the 12 months to October. Though this represents a slowdown from the record 8% increase recorded in 2023, rent growth continued to outpace wage growth (4.9% y/y) for a third consecutive year.

The trends driving rent growth lower will likely persist in 2025, but may not offer long-term relief.

Market pressures eased most in Ontario and B.C.

The rental market eased most in Ontario and B.C., where declining population growth has been the sharpest—relieving demand for units as an influx of rental completions expanded the supply.

These drivers have been especially apparent in Toronto, where rent growth pulled back to 2.7%–the smallest increase among any major Canadian city in 2024.

However, it’s worth noting the increase in average rent was almost entirely driven by a small segment (6.4%) of newly available (turned over) units, where average rent was up 40%. The annual rent increase for non-turnover units was just 0.9% y/y at October 2024.

The slow pace of rent increases in Toronto has helped more people keep up with payments, shrinking the share of rental units in arrears from 20% in 2023 to 15% this year. The $6.5 million in funding that the Ontario Landlord and Tenant Board received last spring may also be resolving some of these cases. Still, the share of delinquent rental households in Toronto is nearly double the national average (7.8%), suggesting renters in Toronto are still grappling with a lack of affordability.

Vacancy rates and rents in other major cities

Market conditions were tighter in Montreal relative to most other major markets, preventing rent growth from slowing to the same degree. Rent growth continued to outpace the national average at 6.3%. This, however, represents a marked slowdown from the 7.9% recorded in the year prior.

Rent growth in Calgary slowed to 8.9% from a record 14% last year, supported by rental stock growth in recent years. Rent increases, however, continued to lead the country—outpacing the national average by nearly two-fold in 2024.

Ottawa and Edmonton are the two outliers where average rent growth rose modestly from 2023. The share of units that turned over in 2024 has also been among the highest, potentially reflecting a larger share of renters transitioning to home ownership as the interest rate environment improves. Large drops in the share of condos used for rentals may also reflect improved ownership affordability as landlords re-occupy units they had previously rented out.

Population growth, jobs will remain themes in 2025

Lower immigration levels and soft labour markets are expected to ease rental demand in the year ahead. This trend, however, may not persist over the medium-term. In fact, population growth and employment prospects are expected to pick up steam in the years ahead, after a brief cooling period.

To prevent a return to the tight conditions of 2023, Canada must sustain—if not accelerate—the pace of rental construction. Maintaining this momentum will be essential to achieve a more balanced rental market and ensure long-term affordability.

Rachel Battaglia is an economist at RBC. She is a member of the Macro and Regional Analysis Group, providing analysis for the provincial macroeconomic outlook and budget commentaries.

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