New insights from Concordia University say ‘more supply doesn't necessarily lead to lower rents’

Canada’s rental market and housing crisis was recently put under a microscope by researchers at Concordia University, with results showing that even with supply increasing prices may continue to rise.

The AI-driven insights were formulated in partnership with Equiton, a private equity real estate firm. The report examines the long-term effects of population growth and other trends driving rapid rent increases and low vacancy rates across the country.

Written by Dr. Erkan Yönder, Associate Professor of Real Estate and Finance, and his team, the report outlines various challenges in the market.

For one, according to their research, rental rates will continue to see significant increases in major cities such as Vancouver, Toronto, Montreal and Calgary.

In fact, they estimate that in less than 10 years time, the average rent for a two-bedroom suite in Toronto will reach $5,600.

The report notes that “more supply doesn't necessarily lead to lower rents, defying traditional economic expectations.” Until annual housing completion reaches about 6% of total dwellings, rental growth in major markets will continue to climb.

Surging population growth was identified as another factor, with the report finding that rental supply must be increased between six to 10 times to meet demand.

And, extreme demand is steadily driving vacancy rates toward 1% across Canada, adding pressure to an already serious situation.

The Canada Mortgage and Housing Corporation estimates that Canada must add 5.8 million new housing units by 2031, 2.2 million of which need to be purpose built rentals.

However, Yönder notes, new supply has historically fallen far short of the pace needed to meet demand.

"Canadian immigration and housing policies have been out of sync for decades," says Yönder. "This research helps create a roadmap showing where private investment, regulatory relaxation, and infrastructure improvements could have maximum impact in terms of creating new housing."

Yönder expects to reveal the details of more upcoming research later this year.