Canada's Rental Reset: Renters Gain Power as Supply Surges

VANCOUVER, British Columbia – December 17, 2025 – After years of fierce competition, soaring prices, and near-zero vacancy, Canada’s rental market is undergoing a dramatic transformation. A potent combination of surging housing supply and cooling demand, driven by a sharp reduction in immigration, is tipping the scales in favour of renters for the first time in recent memory. Markets once defined by scarcity are now experiencing a reset, forcing landlords to adapt and offering tenants a level of choice and bargaining power not seen in decades.

Data from across the country paints a clear picture of a market in transition. According to the Canada Mortgage and Housing Corporation’s (CMHC) 2025 Rental Market Report, the national average vacancy rate for purpose-built rental apartments climbed to 3.1%, a significant jump from 2.2% in 2024 and well above the 10-year average. This shift signals a fundamental change in market dynamics, providing much-needed breathing room in a sector that has long been under immense pressure.

The End of the Landlord's Market?

The most visible sign of this new era is the newfound leverage for tenants. In major urban centres, the days of bidding wars and long lineups for a single apartment are fading. The increased availability of units is translating directly into greater renter mobility and a willingness to “shop around” for better deals.

Nowhere is this trend more apparent than in Vancouver, a city long synonymous with an impossibly tight rental market. The purpose-built rental vacancy rate there has soared to 3.7%, its highest level since 1988. Consequently, rent growth has slowed to a two-decade low. In response to the growing supply and increased competition, landlords are beginning to offer incentives that were unthinkable just a year ago, including a month of free rent, moving allowances, and signing bonuses to attract and retain tenants.

This shift is supported by CMHC data showing a rise in turnover rates, which measure how frequently tenants move. In Toronto, the turnover rate reached 8.7% as renters, facing economic uncertainty and stagnant wage growth, feel more empowered to seek out better value. This increased mobility is further fueled by a growing supply of rental condominium units, as condo owners facing a weak resale market are increasingly opting to rent out their properties, adding another layer of competition for traditional landlords.

A Tale of Two Trends: Cooling Demand Meets Surging Supply

This market reset is not accidental; it is the direct result of two powerful, intersecting forces. On one side, demand for rental housing has cooled significantly, primarily due to shifts in federal immigration policy. Newcomer arrivals, a primary driver of rental demand, fell sharply in 2025. The number of non-permanent residents in Canada, which includes international students and temporary workers, saw its largest quarterly drop in the first quarter of 2025 since the pandemic-era border closures.

Provinces that traditionally absorb the most newcomers have felt the biggest impact. Ontario and British Columbia, home to the largest populations of international students, saw the most significant declines in non-permanent residents. Compounding this, B.C. has also experienced a record-breaking level of interprovincial out-migration and a net outflow of residents leaving the country, further softening local housing demand.

On the other side of the equation, housing supply is expanding at a robust pace. National housing starts rose 5.5% year-over-year in the first three quarters of 2025, with a particular focus on rental construction. Driven by government incentives and a strategic pivot by developers, rental unit starts hit an annual record high, promising a continued influx of new apartments into the market. Ontario has been the engine of apartment construction, while Alberta has led the way in building single-detached homes, attracting a steady flow of interprovincial migrants.

Policy in Action: How Government Decisions are Reshaping Housing

The current market conditions are a clear reflection of deliberate government policy in action. The federal government’s explicit goal to reduce the share of temporary residents in the population to below 5% by 2027 is the primary catalyst for the cooling demand. By implementing an intake cap on international student permits and tightening eligibility for temporary work permits, Ottawa has directly curtailed a key source of pressure on urban rental markets.

Simultaneously, government support for housing construction has helped fuel the supply boom. Favourable financing programs and initiatives like the BC Builds program have encouraged developers to focus on purpose-built rentals, a segment of the market that had been neglected for decades in favour of more lucrative condominium projects. The result is a policy-driven rebalancing, engineered to alleviate the housing crisis that has dominated national headlines.

A Complex Picture: Regional Differences and Lingering Affordability Woes

While the national trend points toward a rebalancing, the situation on the ground varies significantly by region. In Toronto, the purpose-built vacancy rate has hit 3% for the first time since the pandemic, mirroring the trends in Vancouver. However, in Calgary, the vacancy rate has remained stable at a relatively high 5%, as a record expansion in rental supply has been met with equally strong demand from interprovincial migrants drawn to Alberta's economy.

Montreal presents another unique case, where vacancies have risen due to fewer non-permanent residents, yet average rents have continued to grow at a brisk 7.2%, outpacing income growth and worsening affordability for many.

This highlights the most critical caveat in this new rental landscape: easing conditions have not yet solved the underlying affordability crisis. While renters may have more options, the cost of housing remains historically strained. According to CMHC, the average rent for a two-bedroom apartment still rose by 5.1% in 2025, and asking rents for newly available units often remain high. For low-income households, the supply of truly affordable housing remains critically low. The savings from slower rent growth are often erased by the persistently high cost of living, leaving many Canadians with little financial breathing room. As the market continues its correction, the central question remains whether this rebalancing will translate into genuine, long-term affordability for the average Canadian.