Canada

Canada Is Building The Most Rental Housing In At Least 30 Years

Canadian real estate developers are in a mad dash to build purpose built rental units these days. Canada Mortgage and Housing Corporation (CMHC) numbers show huge growth in rental units under construction in June. Canada hasn’t built this much rental stock at once in at least 30 years.

Canada Has Never Had More Rentals Being Built At The Same Time

Canadian rental units under construction reached a new high last month. There were 62,604 rental units under construction in June, up 3.60% from the month before. This represents an increase of 18.53% from the year before – which was also a new high. The country hasn’t seen this much rental construction at once, since at least 1990. The data set stops in 1990, so this may actually be the most built at once – ever.

Canadian Rental Units Under Construction

The number of rental units under construction in Canadian CMAs.

Source: CMHC, Better Dwelling.

Canadians have never seen a growth rate for rental housing like the past few years. We see this number take off in 2014, after staying in range for years. The annual rate of growth hasn’t contracted since April 2014 either. This doesn’t just make it the most number of units under construction at the same time. It’s also the longest expansion of the rental market since at least 1990.

Toronto Rental Units Under Construction Reaches A New High

Toronto is one of the many markets in Canada building a record number of purpose built rental units. There were 7,869 units under construction in June, up 13.89% from the month before. This represents an increase of 14.91% when compared to last year. This is also a new record for the region, being the most number of units since at least 1990.

Toronto Rental Units Under Construction

The number of rental units under construction in Toronto CMA.

Source: CMHC, Better Dwelling.

Th rental supply is on top of condo apartments, which has been making up the gap. From this chart, we can see that purpose rental supply dried up at the bottom of the market in the mid-1990s. Then more recently it really took off in 2015. That conflicts with the current narrative of development taking off after rent controls were lifted. They were only lifted in November 2018. That would mean any rental units planned as a result still wouldn’t have started at this point. But like, totally don’t let data get in the way of a good narrative.

Vancouver Rental Units Under Construction Reach An All-Time High

Vancouver is also in for more rental supply than they’ve seen in recent history. There was 9,702 rental units under construction in June, up 1.29% from the month before. This represents an increase of 14.15% compared to the same month last year. This is the most units under construction in at least three decades.

Vancouver Rental Units Under Construction

The number of rental units under construction in Vancouver CMA.

Source: CMHC, Better Dwelling.

Rental construction started to climb right before prices took off in Greater Vancouver. In late 2015, we see a huge leap in the number of rental units begin construction. Weak absorption of condo pre-sales around 2012 most likely pushed developers to rentals. Now that absorption is falling once again, it wouldn’t be surprising to see more rentals planned.

Montreal Rental Construction Hits A New High

Montreal is seeing its rental supply reach a level of construction not seen before. There were 15,445 rental units under construction in June, up 3.14% from last month. This represents a 30.36% increase compared to the same month last year. Montreal’s data only goes back to 1998, but it’s the most construction in the data set.

Montreal Rental Units Under Construction

The number of rental units under construction in Montreal CMA.

Source: CMHC, Better Dwelling.

Montreal has always been a renter city, but the number being built is higher than typical. Not unlike the rest of the market, this number begun to take off in 2015, and has remained elevated since. Despite the claimed shortage of apartments in Montreal, it may be more of an AirBNB issue. Rental buildings are turning into pseudo-hotels, with up to 2,000 units operating as full-time suites.

Canadian cities are about to get a whole lot of housing supply in the next few years. The record number of rentals is also being met with a record number of condos under construction. Great for households looking for a new place. Not so hot if you’re a negative cap rate condo speculator that was depending on a squeeze to push rents higher.

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14 Comments

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  • Li Gongfu 3 weeks ago

    Similar issue with Toronto. If you cut out the AirBNBs, we would free up a bunch of condos that would support more long-term tenants or owner occupied units.

    The city is toothless and run by people more concerned about tourists having cheap and easy access to the city instead of planning for locals however.

    • Tia Wolfe 3 weeks ago

      Toronto has always had the “are we good enough” complex, trying to appeal to outer city. In stark contrast, the cities that are considered the most important in the world received their accolades by building a city *for* locals. Even NYC’s decline began when it started to plan for tourists instead of locals in the mid-2000s.

  • GTA Landlord 3 weeks ago

    This is also why you’re seeing so many apartment buildings for sale. Rent is going to have downward pressure from new units and negative cap condo speculators, while the actual buildings themselves are worth more than the rent that can be reasonably generated from them can fetch.

    When your building is worth more than it could make working, it’s time to cash your lottery ticket.

    • Erik 3 weeks ago

      Never though about it, but I guess it’s the same issue with the stock market. When the market’s price is in excess of the value the can be produced through sales, the market is considered a bubble. My condo rents for $3,000/month, or you can buy the same unit for about $5,000/month on a mortgage. It’s kind of ridiculous.

      So what happens to rents if there’s a big flood of supply in a city like Toronto?

      • Brad 3 weeks ago

        5k/month? I’d love to see your 1.5M condo I bet it looks amazing at that cost

        • Trevor 3 weeks ago

          Are you one of those people that doesn’t realize how much a condo costs these days? There’s over 200 condos with a list price of over a million on the MLS right now. If you need a second bedroom that’s a reasonable size, you’re almost always over that price point downtown.

  • Erik 3 weeks ago

    Why did it take so long to start building these?

    • Pete 3 weeks ago

      Cap rates. If you can make more selling the unit to someone than renting, you develop a condo. If you can make more renting it, you develop rentals. Developers are businesses, just like anything else. These units under construction would have required a couple of years of planning in advance as well, so it would be reflective of the environment at the time and their anticipated outlook.

  • Jon Tario 3 weeks ago

    This is great and exactly what we need. Now, here is what’s needed next. A website with all of the purpose built rental buildings and available apts. Does this exist? Have you tried finding a rental in TO? Its condo after condo and the last thing I want as a renter is to be in a condo at the whim of a landlord. You get much better long term stability and security in a purpose built rental. Now we just need a central place for them to be listed without the condos.

    • Rui Amaral 3 weeks ago

      Padmapper

    • SH 3 weeks ago

      viewit.ca used to be pretty good for finding Toronto purpose-built rentals, not sure if it’s still good

  • Chester Pape 2 weeks ago

    This doesn’t change the fact that laundered monies will price everyone else off the rental and home buyer markets.

  • S 2 weeks ago

    There’s been a very interesting “thing” popping up in Calgary more and more often. Too early to call it a trend but there have been multiple condo developments (ie: condo units for purchase) that have either kept the same branding and running as rentals managed by, in many cases, the developer, or we’ve seen the developer pivot from selling condo units to owning the entire building and keeping the units as rentals.

    One wonders if condo pre-sales really are so poor in Calgary that it’s worth it for developers to simply turn condo buildings into rental buildings?

    • mark 2 weeks ago

      developers do that so they can reduce the property taxes. if a purpose built rental building is built property taxes are higher than if it was a condo building.
      the builder still rents it out but now as a registered condo. it’s no trend just simple economics.

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