an undersupplied rental market

At the start of every year we wait with baited breath for the annual CMHC rental market report, released in late January and pegged to the prior October, for an update on rental markets across Canada. The 2024 iteration provides plenty of insight into the state of rental housing in this country, including an all-time low national vacancy rate of 1.5%, as well as some perspective on our local rental market here in Metro Vancouver.

To wit, Metro Vancouver has once again earned the distinction of having the lowest vacancy rate among Canadian metro areas, at 0.9%. While this 2023 figure represents no change versus 2022, it’s much lower than the generally-accepted 2-3% vacancy rate range that is considered healthy for a rental market.

But it’s not just low vacancy that’s manifesting from our ever-supply-constricted purpose-built rental market—there are other symptoms, too. Average rental rates continue to rise at an accelerating pace, with last year’s average increasing 9% over 2022. (Note that this metric tracks rents across all purpose-built home types, whether newly-rented or long-term tenanted, new building or old, etc.)

With British Columbia capping annual monthly rent increases at 2% for 2023, the implication is that (with a few exceptions) the vast majority of rental homes had their rents increase by no more than 2%. The reason for the 9% increase then, is the relatively small number of homes that turned over and faced much higher market rents.

Unsurprisingly (given these conditions), the number of homes that changed tenancies last year decreased, to just 8% of all purpose-built rental homes, as renters stay for longer in their current homes to shield themselves from higher market rents. This is inefficient, and has the potential to yield a greater share of renters living in unsuitable housing, as they may choose to stay in a rental home even as their needs change (through marriage, divorce, having kids, changing jobs, going to a new school, etc.).

The good news for renters is that more purpose-built rental homes are on the way, Metro Vancouver started construction on 10,768 rental homes in 2023, a record-high since CMHC started actively tracking in 1990. The reality, though, is that it will take time to increase the rental housing supply, and with 2024 set to be another record-breaking year for population growth, rental demand will only continue to expand in the near-term.