Falling Rents, Rising Vacancies: A Turning Point for Canadian Housing?
Rents are finally falling across Canada, but will it last?
Canada’s rental market is finally easing. Rents have fallen to their lowest level in three years, vacancy rates are rising, and landlords in some cities are offering incentives to attract tenants. New supply and slower population growth are starting to shift the balance.
But just as conditions improve, some governments are expanding rent control.
In this episode, Sabrina Maddeaux and Mike Moffatt unpack new CMHC data, why increased construction is putting downward pressure on rents, and whether those declines will continue. They also dive into Manitoba’s major rent control changes — and the debate over whether such policies protect renters or risk reducing future supply.
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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.
Sabrina Maddeaux: Rents across Canada are at their lowest level in three years, and vacancy rates rose from 2% to 3% last year, according to the CMHC. These lower rents and increased vacancy rates are due to a combination of slower population growth and an influx of new supply into the market. While these reductions have brought relief, average rents in Canada are still over $2,000 a month, causing hardships for low and median-income Canadians.
More work needs to be done to increase rental options and lower rents even further. However, instead of doubling down on these victories and further boosting supply, some provinces like Manitoba are strengthening their rent control rules. While well-intentioned, these reforms risk reducing the supply of new rental housing, which has led to these reductions in the first place.
Mike Moffatt: So, Sabrina, you mentioned this CMHC report. Can you give us a little bit more detail about what they found?
Sabrina Maddeaux: Of course. Back in December, they released their 2025 Rental Market report, which highlighted the increased options for renters. What it found was that cities saw more empty apartments because a record number of new buildings were finished, just as population and economic growth slowed down. Because there were fewer people looking for homes, landlords had to offer deals like free rent and signing bonuses to get tenants to move in.
Mike Moffatt: I find all of this really interesting for a few reasons. The biggest of which is, it doesn’t matter what policy ideas we talked about on this show, from HST rebates, new housing, or other programs to get more housing built, we’ll immediately get pushback that none of those benefits will flow back to buyers or renters, that developers or land owners, or what have you, will capture all of the benefits.
But here’s a clear case of where there were a number of policy changes, including ones like removing the HST from purpose-built rental construction that led to increased homebuilding, increased options for renters, and — surprise, surprise — decreased rents.
In other words, markets work. And it’s not just that they’re lowering rents, but they’re also offering other incentives to have to compete for renters. And that’s how it should be in a healthy competitive market. Sellers should have to find novel ways of attracting and retaining customers, and they are.
Sabrina Maddeaux: We also get a lot of comments stating that increasing immigration, whether it be permanent or temporary programs like temporary foreign workers and international students, has no impact on the housing market. That it’s all just “greed” or “financialization”. But here we have the CMHC clearly stating what should be obvious: When you increase the size of the population without increasing the infrastructure to support that growth, housing becomes scarce, and guess what? Prices go up.
Mike Moffatt: I know we’ll no doubt get emails on this, so I’d just like to point out that it is not the role of international students or temporary foreign workers to ensure that Canada has a functioning housing system. Rather, it’s the role of policymakers to ensure alignment between immigration policies and housing, infrastructure and health care policies, which clearly they did not do.
Sabrina Maddeaux: Do you expect these rent reductions to continue?
Mike Moffatt: Yeah, I do, though, like anything in real estate, the answer is always location, location, location. So how this is going to play out will differ across the country and across housing types. But we need to consider both demand and supply.
On the demand side, population growth is going to be flat until 2028. The economy is still rather weak, so that’s going to depress demand. On the supply side, there are currently around 200,000 rental units under construction in Canada, which will come online at some point. A decade ago, there were fewer than 50,000. So that supply-demand mismatch is going to put a lot of downward pressure on prices.
Sabrina Maddeaux: And the total number of non-permanent residents has been falling in Canada as part of the government’s plan to have this group represent less than 5% of Canada’s population by the end of 2027. But what I’m wondering is, what happens after that? Will those numbers start to climb back up, and will immigration targets start to rise again? And, what could that eventually mean for rents?
Mike Moffatt: Yeah, I wish I had a good answer to that because that’s honestly the biggest question right now in rental development. I’ve noticed that most of the developers who are bullish on rentals are still making purpose-built rental investments.
They’re the ones who are optimistic that the federal government will loosen up immigration restrictions. And on the other side, you’ve got developers who are pulling back. They’re saying, “We’re not going to build any purpose-built rental for a while.” Those are the folks who tend to believe that Canada’s days of a growing population are over. So that really determines the types of investments that companies are making. They’re really making a bet on the future of immigration policy.
Sabrina Maddeaux: Yes. Hard to see which way it will go, but I think it’s going to be very politically difficult for a government to open up the immigration floodgates again within the next 5 to 10 years. Long term, that might be different, but we have a lot to fix first.
Mike Moffatt: I would tend to agree with that as well. I just look at the polling from Ipsos or Abacus or others, and Canadians are still pro-immigration, but the proportion of people who are saying that the numbers are too high are still much larger than those who are saying it’s too low.
Now, there are other factors, of course, other than immigration that determine what’s happening on the rental housing market, and one is the future of other policies, such as rent control policies. Now, I know I’ve asked Cara this before on past episodes, but I don’t think you and I have ever discussed it.
So, as someone who has rented more recently than I have, what is your take on rent control?
Sabrina Maddeaux: We haven’t discussed it before, and I know the broader argument that Cara makes is that rent control contributes, obviously, to a free market, and I understand that in a broader sense.
But as someone who actually rents and has rented now for about 15 years, rent control is a lifesaver. I have to say that. I have friends who, before rent control was brought into Ontario in a limited way, their landlords could just say, “We’re going to charge you an extra 100% or 50% on your rent,” and they had to move. They had to leave their apartments as a way of evicting them, essentially.
Even for myself, rents are so high. Even when rents get raised every year for just the inflation amount, about 2%, that’s still a significant new total on your bill. And then I look at when homeowners see property tax increases that equal way less than the increase to my rent just based on inflation every year, and they freak out, it’s an interesting gap there.
Even when I’m looking for apartments - when I looked for my last apartment, and I’m in one now that I’ve been in since 2020 — I didn’t look at newer builds because in Ontario, rent control doesn’t apply if first occupancy happened after 2018. So there’s also this divergence in the market where rent control applies in some buildings but not others, and renters are very well aware of that.
If my rent went up 20% next year, I would not be able to afford to live in my place.
Mike Moffatt: Yeah, and I think all that’s really fair, and I think I tend to have a more nuanced opinion than most economists.
Most economists will look at the research and say rent control, on average, actually pushes up rents because it decreases the supply, and I think all of that’s true. On the other hand, you could say, “Look, a lot of things matter and yes, the overall level of rent matters, but so does volatility and so does certainty.” So I do think there is a role for government to regulate these things. I think the details of those regulations matter. I think we need to have balance.
And I do think there are reforms that help both sides. So often this is seen as zero-sum rules that either you help tenants, or you help landlords, but not both. But I think there are a series of reforms here, like strengthening the landlord-tenant board that can actually make both sides better off.
So, I’m giving the economist a two-handed answer here, but I don’t think it’s all that black and white. And I definitely agree that renters can be in a more difficult situation, more ripe for exploitation, so having rules that protect their interests, I think, makes a great deal of sense.
Sabrina Maddeaux: We’re in a tricky spot because I think overall rent controls probably do prohibit new supply coming online. But when we have so little supply right now, it’s like the chicken before the egg situation in terms of kicking renters potentially out of their places effectively by raising rents.
But in our group chat, you had mentioned some recent changes to rent control that the province of Manitoba is about to implement. What’s going on there?
Mike Moffatt: So the changes are all part of the provincial government’s Bill 13, which they call the Residential Tenancies Amendment Act. Which the government itself calls it the largest expansion to rent controls in decades, and the scope of the changes are pretty wide, and many of them aren’t that controversial. But overall, I don’t think this is being hyperbolic. I think the government is right that this probably is the biggest change in Manitoba rent control rules in decades.
There are a couple of changes that are worth mentioning. So the first is, right now in Manitoba, units that are at least 20 years old and under $1,670 a month in rent can have their rent increases capped at the rate of inflation, unless a landlord can obtain what’s called an “above guideline increase” or an AGI approval. Now, what the government’s doing here is increasing that threshold from 1670 to 2000 a year. So, higher-end units are now going to fall under the rent control rules. And more controversially, however, the government is also just changing the AGI rules themselves.
Sabrina Maddeaux: What changes is the Kinew government making there?
Mike Moffatt: The most common reason for landlords to be given an AGI waiver is that they invested in upgrades, new windows, appliances, that kind of thing. The government is changing the eligibility criteria for these expenses and how they are treated in AGI calculations. What it essentially boils down to is that it roughly cuts in half the amount landlords can raise rents in response to these investments.
Now, supporters of the Kinew government’s changes claim that the old AGI rules were overly generous to landlords, and that they encouraged gentrification — that a landlord could make a bunch of expensive upgrades, jack up the rents and kick out lower-income tenants and get higher-income ones instead.
But opponents to these AGI changes say that it’s going to make it cost-prohibitive, if not impossible, to invest in things like energy efficiency upgrades and other worthwhile improvements. A big concern here is that this new regime will actually favour landlords who treat their buildings as cash cows — the ones that refuse to make any investments and refuse to try to extend the useful life of their buildings, and that it will also just make it harder to meet those climate and energy efficiency goals.
Sabrina Maddeaux: Yeah, it’ll be interesting to see how this plays out. I’m curious how many landlords actually invest in these types of upgrades to begin with, versus those that just use them to raise rent. I don’t know that in my experience, I’ve seen landlords necessarily invest in meaningful upgrades in places, so maybe this is a good policy for Manitoba, but we’ll have to see how it plays out.
I think the biggest thing, though, for renters, is it’s not only about pure price. It’s about stability, which you mentioned earlier, and when you don’t know what your rent could be the next year or even three years from now, you don’t know if you’re going to be able to live in the same place or even the same community. And that’s very difficult to address in policy. But one of the biggest reasons, I think, why young people want to own is not just financial reasons, but the ability to actually plan their life. Especially when you want to have kids, to be like, “Oh, I can live in this place longer term. I can live in this community, the school district.” And right now, renters don’t have any of that, so it’s very psychologically difficult.
Mike Moffatt: I would agree with all of that, but I would also suggest that a lot of times, all of the new sort of taxes and rules that we put on any kind of businesses increase their costs faster than inflation.
So, I worry about the sustainability of these things, where the costs that a property owner might have might be going up 3 or 4 or 5% a year, but we’re capping their rents at like 1.8%.
So I do understand that the Kinew government, like any government across Canada, is looking at the polling data, seeing how important affordability is to people and trying to do something about it. But I do also worry that it’s going to make it tough to operate these buildings and make those kinds of investments.
I think the last thing we want to see is a bunch of buildings that are kind of falling apart, not well-maintained, simply because it’s too expensive to make those investments.
Governments across Canada talk about wanting to attract more investment, but at the same time, put in rules that discourage investment. So I worry that this may be one of those situations.
Sabrina Maddeaux: One aspect that’s interesting to me is that I think you have two buckets of landlords. You have developers who create purpose-built rentals, and they have to cover their costs month to month, year to year. And then you have your more individual investors who are in this for the long term. And in that case, I think there’s this misconception that the renters should be paying all their mortgage and all their costs, and the landlord should just have the benefit of eventually being able to cash out 30 years in the future and make a huge amount of money, while not putting any costs in from their side during that time period.
Obviously, a landlord needs to offset some of their costs, but I’m curious about your thoughts on this. Should it be the renter’s role to offset the mortgage, the upgrades, everything that a landlord spends over time?
Mike Moffatt: I feel like this is a wacky Wednesday episode where you’re being far more progressive than I am, and I’m taking more of a conservative position here, but I absolutely love that.
I tend not to think of it in terms of responsibility. I think in terms of market conditions and things like that.
I go back to the beginning of this discussion, and I think the role of government is to try to create the market conditions that create affordability, rather than saying there’s some kind of moral or legal responsibility for tenants to pay the landlord’s expenses.
As long as we have a well-functioning market that we have incentives to create new supply, then I think the system works here. So we’ll have to see how this goes.
I don’t love these new rules. I don’t mind the increasing of the cap from $1,670 to $2,000, but I do worry about these AGI changes. I do worry it’s going to make it harder to make those investments, particularly to make those climate investments.
I do take your skepticism around whether or not landlords or property owners are actually making those investments - totally fair point. But I do worry that this is going to restrict their ability to do so. And I do worry that it’s going to reduce investment in upgrading existing buildings.
Sabrina Maddeaux: Thank you, everyone, for watching and listening. And to our amazing producer, Meredith Martin, and editor, Sean Forman.
Mike Moffatt: And if you have any thoughts or questions about policies in Manitoba or Winnipeg, please send us an email to [email protected].
Sabrina Maddeaux: And we’ll see you next time.
Additional Reading/Listening that Helped Inform the Episode:
NDP plan to expand Manitoba rent control protections
Big rent hikes — a made-in-Manitoba problem
Rent control killing jobs: landlords
Bill 13 - THE RESIDENTIAL TENANCIES AMENDMENT ACT
Funded by the Neptis Foundation
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