Despite a growing number of vacant rentals across Canada, the country’s housing market remains largely unaffordable for many tenants, according to the Canada Mortgage and Housing Corporation (CMHC). While there has been a notable softening in the rental market, the relief offered to tenants is still quite limited, particularly for those in the lower-income bracket.
Increased Vacancies and Rental Rates
The CMHC reports that the national vacancy rate for purpose-built rentals has surged to more than 3 per cent in 2025, up from 1.5 per cent just two years prior. Despite this increase in vacancies, rent prices continue to rise overall, albeit at a slower pace. The average rent for a two-bedroom unit increased by slightly more than 5 per cent, hitting $1,550. This is in contrast to the record 8 per cent increase seen in 2023.
In cities like Vancouver, the vacancy rate reached a 30-year high of 3.7 per cent, according to Tania Bourassa-Ocho, CMHC’s deputy chief economist. New purpose-built rentals in Toronto, completed since 2022, have vacancy rates as high as 7 per cent.
Struggling Affordability Despite High Vacancies
Despite these increased vacancies, many tenants are still struggling with housing affordability. Slower population growth and immigration cuts, along with higher youth unemployment rates, have led to a softer rental market. However, these same factors have strained affordability as well. The more affordable apartments still have the lowest vacancy rate overall, and bigger, livable units remain hard to find.
The rental rates for two-bedroom units have seen significant growth in cities like Montreal and Halifax, increasing by 7 per cent and 6.7 per cent respectively. This growth can be attributed to landlords maximizing allowable rent caps and worsening rent-to-income ratios.
The Rise of “Dog Crate Condos”
Apart from purpose-built rentals, the rental condo market has seen an influx of what industry insiders call “dog crate condos.” These smaller units are driving down rent prices, but larger two-bedroom units remain expensive and scarce. According to Ron Butler, the founder of Butler Mortgage in Toronto, between 28,000 to 30,000 condo units, most of them in the 600-square-foot or smaller range, are expected to be completed in 2026 in the GTA.
Current Renters Benefit from Softening Market
While the rental market continues to be challenging for prospective renters, current tenants might find some relief. Many landlords are now offering to forgo rent increases at the time of lease renewal, in an effort to incentivize current renters to stay put. Despite this, Toronto realtor Jenelle Tremblett warns that rental prices haven’t fallen to anywhere near COVID-era levels.
Ultimately, while there has been some softening in the rental market, it is far from being affordable for many tenants. “We’re still far away from a context where the rental market is affordable,” said Ms. Bourassa-Ocho. As such, the affordability crisis in the rental market is a problem that still requires urgent attention and action.
