What’s causing Canada’s unprecedented rise in rent prices?

Rent prices in Canada have reached unprecedented levels according to some experts but the reasons behind the surge in rental costs might not be what you think. 

"Rents in Canada are rising at an exceptionally high speed,” the president of Urbanation Shaun Hildebrand said in a statement released to the press shortly after his company published a report with Rentals.ca on Canada’s November rental numbers. 

Hildebrand continued, saying that such a huge increase was “having a profound effect on housing affordability as interest rates continue to rise.”

"With the most expensive cities experiencing very low supply and the fastest rates of rent increase, regions with high population growth are seeing demand shift into more affordable areas," the president of Urbanation added.

In November 2022, the average price of rent in Canada rose just above $2000 dollars for the first time in history according to the report from Rentals.ca and Urbanation. 

The data was collected from all housing types ranging from the country’s bachelor apartments all the way up to fully detached homes across all sectors and markets. 

What was revealed was a staggering average monthly rent cost of $2024, which was up 12.4% over the previous year's numbers and showed surges across most markets. 

“Rents showed no signs of slowing down last month,” the report read, “rising 2.5% from October and 4.9% over the past three months,” a trend that has only continued. 

January’s rental report from Rentals.ca was just released and it showed that Canada’s annual rent growth exceeded 10% for the ninth consecutive month.

“The annual rate of rent inflation in Canada remained in the double-digits for the ninth consecutive month during January, posting a 10.7% increase,” the report read. 

Average rents dipped slightly to $1996 in January 2023 but when compared to pre-pandemic averages in January 2020, today’s rentals in Canada averaged an increase of 9.5%. 

While the numbers clearly show that Canadians are suffering from a major surge in their rental prices, you might be wondering what’s causing the enormous growth in costs.

Randy Thanthong-Knight of Bloomberg pegged “explosive population growth from immigration” as the main driver of increased rental prices in Canada’s major cities.

But the real issue causing Canada’s rent prices to skyrocket isn’t in the official immigration numbers according to Thanthong-Knight, it's in those numbers not being counted. 

“Prime Minister Justin Trudeau’s government plans to welcome 465,000 new permanent residents this year,” the Bloomberg News Canada journalist wrote, “and increase the annual target to half a million by 2025.”

“But those often-cited numbers understate the pressure on the country’s limited supply of housing—because they don’t include a wave of foreign students, temporary workers, and others with non-permanent visas,” Thanthong-Knight added.

Thanthong-Knight argued instead of 465,000 immigrants last year, Canada actually saw a number of new arrivals closer to roughly one million according to data the journalist pulled from the Canadian Imperial Bank of Commerce. 

Without knowing how many people are coming into Canada, provinces and municipalities are unable to account for the growth—which has led to a lower housing supply that in turn led to higher rental rates in Canada’s most desirable cities. 

Higher rental rates in Canada’s big cities have led to knock-on effects as people priced out of big city markets left to seek cheaper accommodations elsewhere. 

“Housing costs are causing some to uproot from the priciest cities in search of cheaper locations,” Thanthong-Knight wrote.  

The solution to Canada’s growing rental crises shouldn't be to restrict immigration but rather to accurately count everyone coming in according to Thanthong-Knight, that way governments at all levels can properly plan for the future of our communities.