Canada’s rental market is loosening, but not in a way that solves the country’s housing affordability problem. In its 2025 Rental Market Report, the Canada Mortgage and Housing Corporation said the national vacancy rate for purpose-built rentals rose to 3.1%, up from 2.2% in 2024 and above the 10-year average. CMHC attributes the increase to historically strong rental completions, slower population growth, and weaker economic conditions. In simple terms, more units are coming to market at the same time demand is softening.&nbsp;At first glance, rising vacancy may sound like welcome relief. For years, the dominant housing conversation in Canada was about not having enough supply. But the latest data suggests a more nuanced problem: we may be adding supply, yet still missing the kind of housing many Canadians can actually afford.That disconnect is visible across major cities.In Toronto, the purpose-built rental vacancy rate rose to 3.0%, the highest level seen since the pandemic period. Vancouver’s vacancy rate climbed to 3.7%, its highest level since 1988, while CMHC noted that rent growth there is now at a two-decade low. Calgary remained comparatively stable at 5.0%, with demand still keeping pace with elevated new supply. In Ottawa, the overall vacancy rate reached 3.0%, but units built after 2015 posted a much higher vacancy rate of 6.7%. At the same time, CMHC noted that lower-rent units in Ottawa remained in very short supply, with vacancy below 1% in the lowest rent quartile.&nbsp;That is the real story.Canada does not simply have a vacancy problem or a supply problem. It has a mismatch problem. More specifically, it has a mismatch between the type of housing being delivered and the type of housing many renters actually need. Newly completed units are often priced at the higher end of the market. Meanwhile, affordable rental stock remains scarce, even in cities where vacancy is rising. CMHC explicitly notes that while market conditions have softened, affordability remains a challenge because the supply of units affordable to lower-income households is still limited.&nbsp;This brings added context to the policy discussion around vacant homes.In Toronto, property owners must declare the occupancy status of their residential properties each year under the Vacant Home Tax regime. The policy is designed to encourage owners to rent out or sell homes that might otherwise sit empty. The City states that only one declaration is required per roll number for qualifying multi-unit residential properties, and if at least one unit was occupied for six months or more, the property can be declared occupied. The tax applies to homes left unoccupied for more than six months, subject to certain exemptions. For the 2025 taxation year, the rate is set at 3% of a property’s current value assessment.&nbsp;The policy has a reasonable goal: increase available housing supply by discouraging owners from leaving homes vacant. But there is an obvious limitation. If the homes being brought back into the market are still priced beyond the reach of average renters, then the increase in supply may have only a limited effect on affordability.That same logic applies more broadly to the resale market.A separate but related trend has emerged in recent years: some homeowners are choosing to leave properties vacant while preparing them for sale.&nbsp;Recent data indicates that there has been a significant increase in new listings that are vacant; some estimates being over 30%. Selling – or buying - a property with a tenant has become increasingly risky due to spreading fraud and slower than desired regulatory resolution processes. Rising costs of living and unemployment leave the increasing percentage of the population unable to afford rental market rates. All these facts also contribute to the already complicated realities of GTA real estate market.&nbsp;As a result, some owners conclude that carrying the cost of a vacant property is preferable to introducing uncertainty into a sale.This is not an ideal outcome for anyone. It does not help renters, it does not improve affordability, and it does not make the market more efficient. But it reflects the reality of a housing system that has become increasingly fragmented. The lesson is straightforward. While supply and demand matter, the most important question may be supply of what, and for whom.Canada’s housing challenge is not only about how many units exist. It is about whether those units are affordable, suitable, and aligned with the needs of the people actually looking for housing. Until that gap narrows, rising vacancy rates may offer an interesting headline, but not a true solution.<figure class="image"><img src="https://files.rifo.co/CompanySite/222/222_image.png"></figure>

Vacant Homes, Tight Budgets: Canada’s Real Housing Problem

Canada’s vacancy rate rose to 3.1%, but affordability remains the real issue as Canada faces a growing mismatch in housing supply and demand.

About RIFO

Business

Investors

News

Contact Us

Contact Us