Ottawa’s rental vacancy rate more than doubled in 2020 as thousands of new apartments were put on the market at the same time as the city’s population of students and recent immigrants plummeted, the Canada Mortgage and Housing Corp. says.
A new report from the national housing agency released Thursday pegged the vacancy rate for purpose-built rental apartments in the capital at 3.9 per cent last year, up from 1.8 per cent in 2019.
The glut of rentals was particularly acute in the student haven of Sandy Hill, where the vacancy rate was 6.7 per cent – tied with Alta Vista for the highest among all Ottawa neighbourhoods.
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CMHC analyst Anne-Marie Shaker said it wasn’t surprising that the number of empty apartments jumped considerably in 2020.
More than 2,300 new rental units were added to the city’s inventory last year, yet the agency estimates that only about 890 of those were actually occupied. Shaker said that was largely due to a sharp decline in the number of recent immigrants and international students attending local universities – two groups that make up a sizable share of renters – in the wake of COVID-19.
Flurry of construction
In addition, she suggested that more young professionals may have decided to enter the red-hot housing market while they could still afford to, further eroding the city’s tenant base.
“Once students and immigration come back, slowly the vacancy rate could decline,” Shaker told OBJ. “But we have a lot of units under construction in Ottawa as well. The outcome will depend on the balance of supply and demand.”
According to CMHC data, there were 2,352 apartments under construction in the capital as of June 30, 2020 – nearly triple the number of new builds that were in the works five years earlier as developers scrambled to meet pent-up demand for rental units.
(The vacancy rate doesn’t include condo units that are being rented out by their owners. CMHC did not specify the vacancy rate for rental condos, only saying it declined during the pandemic.)
Yet despite the jump in vacancies, average apartment rents still rose 4.5 per cent last year, with the benchmark two-bedroom rate spiking 5.2 per cent to $1,517. That figure includes below-market rates paid by tenants who are covered under provincial rent-control provisions as well as market rates charged by landlords as units turn over.
“With scarce vacancy in the previous three years, landlords were encouraged to raise rents once a unit is vacant,” the agency said in its report, adding that its research suggested that apartment managers were more likely to offer bonuses such as a month’s free accommodation to entice new tenants rather than lower their asking rents.
For the first time, the report also looked at rent arrears. Ottawa’s rate of 3.5 per cent ranked sixth among major Canadian cities and well back of first-place Toronto, where the rate was nearly 10.7 per cent.
“Although the vacancy rate rose, Ottawa’s rental market and its housing market in general have been supported by the relative stability in public administration employment,” the report said.
Across the river in Gatineau, meanwhile, the vacancy rate was unchanged at 1.6 per cent in 2020, while the average rent edged up 2.4 per cent to $906.
CMHC noted that while a record number of units have been added to the city’s rental stock over the past three years, new apartments are being snapped up as quickly as they’re built.
The agency said much of the surge in demand is being fuelled by households moving to the region from the Ontario side of the river in search of cheaper housing.
“It is likely that households in Ottawa decided to move to the Gatineau area in greater numbers than usual, attracted by a more affordable market,” CMHC said in its report, noting that about three-quarters of new households opt to rent when they first relocate to the city.
Across the country, the rental market vacancy rate in Canada’s big cities edged up to 3.2 per cent in 2020 from two per cent in 2019.
The increase came as COVID-19 spread across Canada, handing renters negotiating power and short-term rentals became less attractive while travel was restricted and unemployment soared.
‘Weaker inflows of new renters’
“The economic impact of the pandemic has significantly reduced rental demand,” said CMHC chief economist Bob Dugan said in a statement.
“Lower international migration, fewer student renters and weaker employment conditions led to weaker inflows of new renters.”
CMHC’s report showed the vacancy rates for Canada’s three largest metropolitan areas, Toronto, Montreal and Vancouver, rose to 3.4 per cent, 2.7 per cent and 2.6 per cent respectively, as they grappled with higher supply and lower demand.
The Toronto area’s vacancy rate was at a 14-year high fuelled by job losses in the service and hospitality sectors, which tend to pay lower wages and employ younger workers.
Newcomers pushed up the rate too.
“Immigrants and non-permanent residents make up a significant share of renter households in the GTA. The COVID-19 pandemic all but halted immigration flows to the GTA,” said CMHC.
“The closure of international borders lessened the population growth of these two key groups that drive rental demand.”
– With additional reporting from the Canadian Press