Ottawa’s rental vacancy rate held steady last year, while average rent hikes were lower than the 10-year average as new supply matched increased demand for units, the Canada Mortgage and Housing Corp. said Friday.
The average rent for a two-bedroom apartment in Ottawa rose to $1,550 in 2021, up 1.3 per cent from a year earlier, CMHC said in its annual rental market report. Overall rents in the capital increased 2.2 per cent between October 2020 and October 2021, below the average for the past decade.
CMHC said that was partly because the city’s rental vacancy rate remained stable at 3.4 per cent, down half a percentage point from 2020 and a drop the agency considers statistically unchanged.
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That’s a stark contrast to the previous few years when the vacancy rate hovered below two per cent, triggering fierce competition for the few apartments that hit the market.
“The scarcity of vacant units from 2017 to 2019 encouraged owners to increase rents when a unit was vacated,” the report said. “With a higher vacancy rate over the last two years, the pressure appears to have decreased slightly this year. The rent freeze in 2021 may also have contributed to the slowdown.”
While a “considerable number” of new units were added to the city’s rental housing stock last year, the agency said demand rose enough to keep the vacancy rate unchanged.
Economic rebound
CMHC noted the city’s economy rebounded somewhat in 2021 after the pandemic-fuelled downturn of the year before, prompting more young people to enter the rental market.
The agency also said the “historically low number” of homes for sale in Ottawa stoked an overheated housing market and “may have limited access to homeownership for some renter households,” forcing them to stay in their apartments and choking off a potential source of vacancies.
The report noted Ottawa’s rental supply is much scarcer for low-income households, with vacancy rates for two-bedroom apartments in the lowest rent range – that is, less than $1,200 – ranging from zero per cent to 0.6 per cent throughout the city.
CMHC said someone renting a two-bedroom purpose-built apartment in Ottawa would have to work 146.5 hours per month to keep monthly rent at 30 per cent of their gross income, the threshold of affordability. That’s up 2.2 hours from the previous year.
By contrast, in Vancouver it would take 198 hours of work per month to meet the affordability mark, while in Toronto it would take 178.3 hours per month.
Across the river in Gatineau, meanwhile, the vacancy rate fell to 1.1 per cent from 1.6 per cent in 2020, while the average rent for a two-bedroom apartment jumped 6.4 per cent to $1,035 – the largest yearly increase since CMHC launched the survey in 1990.
The agency said surging demand for rental housing in Gatineau is being driven by households moving to the region from the Ontario side of the river in search of cheaper housing. CMHC added that the shift to remote work during the pandemic “may have made the decision easier in some cases.”
Nationally, tenants faced another year of affordability challenges as rents crept up nationally and were particularly high in Vancouver and Toronto.
CMHC’s findings show the average rent for a two-bedroom home in the 37 areas it studied increased to $1,167 last year, a three per cent rise from $1,128 in 2020 and $1,080 in 2019.
Bob Dugan, CMHC’s chief economist, attributed the rise in rent to a supply and demand imbalance, and said the increase was also affected by the different speeds of recovery cities have experienced in the latest stage of the COVID-19 pandemic.
Affordability ‘mismatch’
Vancouver and the Greater Toronto Area, he said, were facing the most severe affordability challenges because those cities held onto the highest average monthly rent for a two-bedroom apartment. Vancouver rent increased 2.4 per cent to $1,824, while rent in the GTA rose 1.5 per cent to $1,666.
“When you look at lower income households, the mismatch between affordable rentals and the number of households gets worse,” he said.
“Last year in Toronto and Vancouver, only 0.2 per cent of the rental universe was affordable for the bottom 20 per cent of earners.”
In some markets where people flocked to find more space when their employers allowed remote work, the year-over-year increase in hours needed to work to keep monthly rent at 30 per cent of a gross income was even more dramatic than what Toronto experienced.
In Peterborough, where the average two-bedroom unit monthly rent was $1,316, it took 160.5 hours to achieve that feat last year, up 36.7 hours from 123.8 hours in 2020.
In Windsor, where the average two-bedroom rent rose by more than five per cent to hit $1,154, CMHC estimated it would take 137.8 hours, an 18.6-hour jump from 119.2 hours in 2020.
This surge could persist if people continue to gravitate to suburban and rural markets, because it will take supply time to catch up, said Dugan.
“I’m sure that the city planners in some of these smaller communities didn’t have a five-year plan that included a pandemic,” he said.
At the other end of the spectrum, Montreal had the lowest rent levels with an average monthly rent of $932 and 105.8 hours needed to keep monthly rent at 30 per cent of a gross income.
Meanwhile, the national vacancy rate sat at 3.1 per cent last year, compared with 3.2 per cent in 2020 and 2.2 per cent in 2019.
Rates declined in 21 of the 37 markets CMHC analyzed, including Vancouver, Calgary, Victoria and Halifax, but increased in three locations: the Greater Toronto Area, Winnipeg and Abbotsford-Mission.
The remaining 13 areas, including Montreal, held steady with their vacancy rates.
Montreal’s rate was one of the key factors behind the stability of the overall national vacancy rate because the Quebec city’s rental market accounts for roughly 30 per cent of the national rental market.
Toronto holds about 15 per cent of the rentals in the country, while Vancouver has five per cent.
– With additional reporting from the Canadian Press
