According to the July 2024 Consumer Price Index report from Statistics Canada, the shelter factor of the CPI rose by 5.7% year-over-year, outpacing the overall inflation rate of 2.5%. This is an ongoing trend—shelter costs have continually been one of the key drivers of inflation. Within the shelter category, rent prices have been particularly strong, increasing by 8.5% year-over-year in July. These persistent pressures from housing costs have made it more difficult for the Bank of Canada to bring overall inflation back to its 2% target, despite the price decreases seen in other categories.
How did rent become so expensive?
So, why is housing so expensive in Canada? A variety of factors have contributed to the high cost of housing, particularly rentals. Here are a few of the main factors:
Demand greater than supply: The appetite for rental housing in Canada has been growing faster than the supply for years, which has resulted in a very competitive rental market and, therefore, increasing prices. In a recent report, Statistics Canada noted that the number of renter households in Canada increased by 21.5%, greatly outpacing the 8.4% growth in the total number of those who own homes. That means the number of people in Canada looking for rentals keeps growing even as the supply diminishes.
Record-low vacancy rates: In many Canadian cities, the vacancy rate for rentals is incredibly low, which invariably drives up prices. According to a 2024 report by the Canada Mortgage and Housing Corporation (CMHC), the country is facing record-low vacancy rates of 1.5%, even as rents reach record heights.
Inflation: The rising cost of living, including the cost of housing, has been a key driver of inflation in Canada, which in turn causes rents to rise. In October 2023, annual rent inflation reached a whopping 8.2%, the highest level in over 40 years.
Increase in population: A significant rise in foreign students and immigrants also contributed to the housing crisis. This surge has heightened competition for rental housing, particularly in those major cities where many students and newcomers tend to move, like Toronto and Vancouver.
It’s a cycle. As a result, the demand for rental properties has outpaced supply, driving up prices and making it harder for both new arrivals and existing residents to find affordable housing.
Will rent prices continue to rise in Canada?
Statistics Canada showed signs of rent prices slowing, but both rent and mortgages remain the largest contributors to inflation right now. For August 2024, rent was 8.9% year over year, but only 1% month over month.
And according to a report from Kijiji Canada, August 2024 saw rent prices in fewer big cities climbing in price month over month: “Quebec City was one of the rare cities that saw a monthly median rent increase—1.89% to be exact, which translates to a $25 increase. The only other major city that saw a price increase was Edmonton at 0.6%. Montreal and Halifax median rent stayed stable at $1,650 and $2,200 respectively. Meanwhile, Vancouver saw the biggest month over month dip of -2.95%, followed by Calgary and Ottawa, both at -2.28%.”
Based on interest rates dropping, and landlords having cheaper mortgage interest, we might see rent prices drop, too. But the supply and demand could put pressure to keep rent prices relatively high.
Rent increase guidelines
In Canada, each province and territory has its own rules for what someone can charge for rent, so it’s crucial to check what rules relate to your regional living situation. For example, in Ontario, rents are controlled by the Residential Tenancies Act (RTA), which sets the maximum limits by which landlords can increase the rent every year. For 2025, landlords are limited to rent increases of no more than 2.5%. Note, however, there are exceptions for when a landlord can charge a higher rent, such as when an old tenant moves out of the rental or when the property is newly built.
Regardless of where you live, there are generally protections in place that prevent landlords from demanding an unreasonable rent or from arbitrarily raising rent. Again, using Ontario as the example, if a tenant believes their rent has been unfairly increased, they can file an application with the Landlord and Tenant Board (LTB) to dispute the increase.
