Calgary rent increase the highest year-over-year across Canada: CMHC

A new report suggests Calgary is seeing the highest yearly rental increase amongst all Canadian cities as vacancy rates continue to decline. 

The 2024 Canada Mortgage and Housing Corporation (CMHC) Rental Report was released on Wednesday.

In it, CMHC says Calgary’s purpose-built rentals saw rent increase 14.3 per cent in 2023 compared to 2022, which also represents the highest growth recorded for the city since 2007.

It means the average two-bedroom unit will cost around $1,695 per month to rent.

The price for condo apartment rentals, meanwhile, went unchanged, sitting at $1,819 per month, on average, for a two-bed unit. 

"To some extent it's the demand side driving vacancy rates down that's allowing rents to rise in this way," said Taylor Pardy, lead CMHC economist for the Prairies and Territories region.

"Demand is quite strong, but also things like rising mortgage payments and rising cost of utilities, and things like that on the part of landlords, they’re in many cases, trying to pass on some of those costs to tenants as well."

Pardy notes that the vacancy rate for purpose-built rentals in Calgary also saw a steep decline, from 2.7 per cent in 2022 to 1.4 per cent in 2023. Condos remained at 1.0 per cent vacancy. 

He points to higher population growth and a limited supply of new builds as factors leading to this surge in demand.

On the purpose-built rental side, Calgary saw an increase of 3,010 units last year, which is an uptick of 6.2 per cent and historically quite strong.

Builds for condo unit rentals grew by 1,455 units, and the percentage of condos stayed relatively stable at 38.4 per cent.

"So we’re seeing these supply increases, particularly on the purpose built side, and we have a lot of purpose built rentals under construction," Pardy said.

"Currently, there's over 9,000 units under construction in Calgary right now, but with that just over 3,000, unit increase in the purpose-built side this year, it’s not keeping pace with demand as of yet."

The added competition and lack of supply means hundreds to thousands of people are on waitlists in Calgary for an apartment in some locations such as the University District.

Those looking for a rental, like Carlos Costa, say the struggle to find an affordable place to live is becoming increasingly difficult.

He’s been searching for three months, but can’t find anything cheaper than $1,600 for a one-bedroom place near his work downtown.

"Thankfully, I’m able to stay with some family friends right now, which is a blessing, but it seems like property rental values are just outrageous," he said.

"I moved here from Victoria thinking it would be cheaper, but I’m concerned the prices are going to keep going up to the point where I just won’t be able to afford it."

Lowest national vacancy rate since 1988

Canada's average rent saw record growth in 2023 as demand outpaced supply, while the rental vacancy rate reached a record low of 1.5 per cent, CMHC said.

According to the agency, the national vacancy rate for purpose-built rental units last year was the lowest since 1988, when the organization began recording the metric.

The federal housing agency uses purpose-built rentals as its representative sample.

By comparison, the vacancy rate for those units was 1.9 per cent in 2022, which, at the time, was the lowest rate seen in more than two decades.

The national vacancy rate reflects the percentage of unoccupied and available residential units across the country.

A lower rate typically means greater competition among renters and a higher incentive for unit owners to raise their rates.

For two-bedroom condominiums up for rent, the average vacancy rate fell from 1.6 per cent in 2022 to 0.9 per cent in 2023.

"While the recent revival of rental construction has been encouraging, it was evidently not enough to ease the market and curb steep rent increases," the report reads.

Rent outpacing inflation

Rent prices soared in most markets, consistent with the observed decline in vacancy rates.

Growth in the average rent for two-bedroom purpose-built apartments accelerated "sharply" to a record eight per cent in 2023, in a jump that outpaced both inflation (4.7 per cent) and wage growth (five per cent).

That left renters paying, on average, paying $1,359 per month for those units last year.

That growth figure was up from the 5.6 per cent rent growth recorded in 2022 and well above the 2.8 per cent growth documented from 1990-2022.

Meanwhile, the average rent for two-bedroom condos was $2,049 in 2023, up $1,929 the previous year. This represented a six per cent increase.

Not all markets impacted equally

Lower-income renters faced significant competition in their hunts for affordable rates. In some cities, finding affordable units was next to impossible.

For a rate to be considered affordable, it should cost less than 30 per cent of a renter household’s before-tax income, the federal housing agency said.

In Vancouver, Ottawa and Toronto, the proportion of rental units considered affordable for the bottom 20 per cent of earners was "statistically zero," the report notes.

In Edmonton, those units made up 12.7 per cent of total spaces. 

In Calgary, 3.1 per cent of apartments were considered affordable for low-income renters.

In Montreal, 18.1 per cent of units were available at affordable rates for low-income earners. However, many of those units were either bachelor or one-bedroom units, which could be unfit for families.

Vancouver remained the tightest rental market in the country, with a vacancy rate of 0.9 per cent, unchanged from 2022.

Ottawa’s vacancy rate also remained the same as the 2022 level, sitting at 2.1 per cent.

In Toronto, Canada’s largest city, the vacancy rate dropped from 1.6 to 1.4 per cent.

Meanwhile, in Montreal, the rate fell from two per cent to 1.5 per cent.

Vancouver remains the most expensive rental market, with $2,181 being the average monthly rent for a two-bedroom purpose-built apartment, followed by Toronto, where the average rent for those units was $1,961 in 2023.

The least expensive apartments are concentrated in Quebec, exemplified by Montreal’s relatively low 2023 average two-bedroom rent of $1,096. 

Immigration, other factors impacting demand

Immigration led to increased demand in the rental market in most large centres, while high interprovincial migration contributed in Alberta, CMHC said.

With net immigration to Canada trending sharply higher since 2020, there was increased pressure on the rental markets of Toronto, Montreal and Vancouver, cities that are also the destination for many international students.

In Edmonton and Calgary, the influx of interprovincial migrants — people who move from one province to another — led to increased demand.

The report suggests people are likely drawn to Alberta — at least partly — by the relatively strong employment growth in Calgary and Edmonton as well as lower home prices relative to Toronto and Vancouver.

Employment growth among young Canadians and the low affordability of homeownership also led to increased demand in the rental market overall.

With files from The Canadian Press