Canada’s vacancy rate dropped to the lowest level on record last year at 1.5%, according to a new report from the Canada Mortgage and Housing Corporation while the country also simultaneously saw a new national high for the average cost of rent.

“Although most Canadian cities saw increased rental supply, it was not enough to keep pace with increased demand pressures,” read a press release from the CMHC on Wednesday.

Renters are forced to compete against one another more aggressively when the vacancy rate is so low, which allows landlords to increase prices with less resistance.

Canadians are paying new highs on rental units for six consecutive months, with the average asking price being $2,178 per month in October. The upward trend has seen a 9.9% year-over-year increase.

Record high mortgage rates have made the possibility of home ownership far out of reach for many Canadians, who are stuck dealing with a volatile rental market.  

“In 2023, Toronto, Montréal, Calgary and Edmonton all reported significantly lower vacancy rates. Vacancy rates held steady in Vancouver and Ottawa. These markets remain tight, as this stability follows significant declines in 2022,” reads the study.

Vancouver remains the tightest rental market in Canada, with the vacancy rate in steep decline in Calgary and Edmonton not far behind, now below 3%. 

“While Montréal didn’t see as large a decline as other major markets, trends in this city tend to drive aggregate national trends because of its large rental market, representing 28.4% of the 2023 rental universe. This exceeds the next 2 largest shares combined (Toronto at 14.6% and Vancouver at 5.5%),” the study continued.

Canada’s dramatic population growth also resulted in a lower vacancy rate and increased rental pricing. 

“Net immigration to Canada has trended sharply higher since 2020, reaching new highs and providing a strong push to rental demand in the 3 largest cities of Toronto, Montréal and Vancouver,” reads the study. 

“These markets are also the destination for many international students to Canada, the number of whom has also reached new highs since 2020, putting further upward pressure on rental demand in these centres.”

Immigration Minister Marc Miller acknowledged that the current level of temporary foreign workers and international students has grown at an unsustainable rate, going as far as to say the system is “out of control” as he vowed to look further into it.

Additionally, the federal government recently announced a cap on annual international study permits, reducing the number by 35% as a remedy to alleviate the housing shortage. 

Rental prices for purpose-built, two-bedroom apartments have escalated “sharply,” up by 8%, meaning renters paid $1,359 on average for that type of unit. 

That 8% increase outpaces both inflation and wage growth.

According to the CMHC, the standard rate for affordable rent should cost the occupant no more than 30% of their monthly income. 

Based on the CMHC standard, only 3.1% of those units were available to low-income renters in Edmonton.

In Calgary, that number increased to 12.7% of total rentable spaces. 

Montreal had the best rate for affordable rental units, with a rate of 18.1% of spaces available for low-income renters, however, the majority of those spaces were one-bedroom units, unfit for a family.  

For renters living in Toronto, Vancouver and Ottawa, the amount of affordable rental units for the bottom 20% of earners in Canada is “statistically zero.”