Canada’s housing crisis has begun to ease as the national apartment vacancy rate has increased to 3.1%, above the threshold that the Canada Mortgage and Housing Corporation says indicates high demand and tighter markets.
Apartment vacancy is more than double the rate of just two years ago, according to the housing agency's annual 2025 Rental Market Report issued this past week. It represents a sizable increase from the 2.2% vacancy rate the CMHC reported last year and the even lower rates seen in 2023 and 2022.
A 3.1% level is in an area considered equilibrium, or desired balance between landlords and tenants, offering enough choice for renters without creating excessive risk for property owners.
The increase in apartment vacancy this year has been largely driven by record supply growth, according to the CMHC. Government-backed programs have accelerated the construction of purpose-built rental units, adding thousands of new apartments to the market.
At the same time, housing demand has softened due to economic uncertainty, slower job growth and reduced immigration compared to previous years. Renters now have more options, and landlords are responding with incentives such as free rent periods and moving allowances to attract tenants, the CMHC report notes.
In Toronto, Bosley Real Estate investor and broker Davelle Morrison said rents have continued to fall, primarily because of the large number of new multifamily completions this year and last. Morrison reports that interest from renters has waned because they now have many options.
“It’s down compared to what I was able to get two years ago, when I’d have eight amazing applicants," Morrison said in an interview. "This year when I rented out my place, I had to bring the price down by $100 and then it’s crickets, and then I finally get one good applicant. It’s a much different rental market than it was."
Morrison said it will consequently be a while before investors express interest in purchasing condos again. She believes bear market conditions will persist through 2026. “What I’m telling my investor clients is to stick to the housing market and have multiple units within that house,” Morrison said.
A definite market shift
Ryan Coyle, co-founder of Toronto-based Connect.ca Realty, said there’s a definite shift in the market and that small-time investors are the only ones taking advantage of it.
“Resale condo supply is starting to go down on the rental side,” he said. “It’s kind of the way you identify a shifting market like this is when there’s no one buying, no one investing, and no one taking advantage of it.” But that may give way to family offices and other wealthier investors, such as institutions, buying up properties at discounted prices.
Meanwhile, Toronto and Vancouver, historically among the tightest rental housing markets in the country, are seeing longer leasing times for new units and modest declines in advertised rents.
In Toronto, vacancy rates have edged closer to the national average, while Vancouver and Calgary continue to post vacancy rates above the national average, providing some relief for renters and contributing to slower rent growth. Montreal and Ottawa are still experiencing rent increases, albeit at a significantly slower pace than in previous years.
In Greater Toronto, Canada's largest housing market, vacancy has climbed to 3.4%, up from 1.1% in 2022, according to the CMHC report.
Pivot to purpose-built rentals
CoStar expects the rate to rise further as a wave of new completions hits the market. Elevated supply, combined with monthly rents that have surged 58.5% over the past decade to an average of $2,230, is straining affordability and driving renters toward suburban markets or shared housing.
Developers are pivoting from condos to purpose-built rentals amid falling values and tighter lending, as noted in a CoStar analysis.
Vacancy in Vancouver’s apartment market has surged to 4.3%, a sharp increase from the decade average of 1.8%. The rate is increasing due to an unprecedented wave of purpose-built rental development — nearly 25,000 units under construction — outpaces demand, according to CoStar data. Absorption of new supply has been slow, particularly in premium 4- and 5-star assets.
Immigration reforms implemented under Prime Minister Mark Carney, including caps on international student permits and stricter eligibility requirements for foreign workers, are contributing to the increase in vacancy in Canada’s housing market.
Reducing the percentage of temporary residents and limiting study permits has curbed demand for rentals near universities, leading to higher vacancy rates in urban markets. Developers and landlords who rely on foreign student inflows face slower lease-ups and rising concessions. These measures are aimed at easing affordability issues and cooling overheated markets, but they also can create uncertainty among investors chasing immigration-driven growth.
The higher vacancy rate follows years of historically low vacancy rates that led to considerable effort to solve the housing crisis. That led the CMHC to call for as many as 480,000 homes to be built annually.
In 2019, Canada’s national residential vacancy rate hovered around 2.2% and by 2022 and 2023, it had dropped to 1.5%, creating intense competition for rental units and driving rents to record highs. That scarcity fueled affordability concerns and prompted government intervention to boost rental supply.
The CMHC forecasts vacancy rates will remain near or slightly above 3% in 2026, as new supply continues to enter the market.