The fact 45,864 people moved to Alberta in the final quarter of 2022, according to Statistics Canada, is if you’re an Albertan, good economically. More new faces with more new money to buy more new things..The rental vacancy rate in Alberta at the end of October 2022 was 4.3%, down from 6.1% the year before, the most recent figures from Canada Mortgage and Housing Corporation (CMHC)..In Calgary and Edmonton, despite both having more rental-specific buildings completed or under construction since the 1990s, vacancy rates dropped to, respectively, 2.7%, the lowest since 2014 and 4.3%, down from 7.3% last year..Diminishing supply is putting, and will put, more upward pressure on rents..The situation is similar across the country, but it’s not as if builders aren't doing their best to add to rental stock, says a new report from RBC Economics, which says “Canada’s stock of rental housing boomed in 2022, growing at 2.4%, the fastest pace since 2014.”.“That boost has never been needed more. With affordability challenges pushing home ownership rates to a 30-year low and annual federal immigration targets set to grow 8% by 2025, strong demand for rented accommodation is unlikely to ease,” says the report..Calgary had the largest rate of increase of purpose-built rental stock, at 7.2%, followed by Ottawa-Gatineau (+5.5%), with the smallest rate of increases in Toronto (+2.1) and Montreal (+1.4%). T.Even with the growth last year, Canada's current purpose-built rental stock is struggling to keep up with demand..“The vacancy rate in this category plunged to its lowest point in 21 years in 2022, dipping to just 1.9%. The total decline of 1.2% in just 12 months represented the steepest single year decrease in more than three decades,” says RBC. “And relentless competition for units drove the highest annual increase in rent growth on record.”.“Overall, rent growth for a two-bedroom purpose-built unit rose 5.6% with jumps in Gatineau (+9.1%), Toronto (+6.5%) and Calgary (+6.0%) among the highest in Canada last year.”.Vacancies in the condo market, where private investors purchase units for rental, are even tighter, says RBC, registering .7% in Ottawa-Gatineau, 1.1% in Toronto and 1.8% in Calgary..“The rapid absorption of these new units highlights the severity of the rental housing gap, that is, the difference between the projected rental stock at the current rate of increase and the rental stock required to achieve balance, or a 3% vacancy rate, while keeping up with future demand,” says RBC..RBC estimates there's already a 25,000 to 30,000-unit deficit in Canada’s purpose-built rental stock, a shortfall that is likely to grow dramatically over the next four years as demand soars..“By 2026, the rental housing gap could reach more than 120,000 units, nearly four times the estimated shortfall today,” says RBC. “Canada will need to add 332,000 units to its current rental stock between now and then to achieve a balanced market with rent stability. That would represent roughly a 20% increase in the annual pace of construction achieved in 2022 when 70,000 rental units were completed.” .“Turning condo units into rentals, converting commercial buildings and adding rental suites to existing homes would certainly help ease the pressure. But these responses are unlikely to be enough. The best way to meet current and future demand, as well as provide stability and hopefully greater affordability in the rental market. is to considerably grow the supply of purpose-built rentals.”.All levels of government have thrown money at the problem, but it’s about more than money, says Paul Betts, president of GAP Marketing Group, a Calgary-based real estate consulting company. “.“There has to be significant movement when it comes to (municipal) zoning (bylaws) across the board,” says Betts. “Everyone establishes their defensive position depending on their situation and this NIMBYism when it comes to rezoning and density is going to have to change.” .Every municipality is faced with a specific set of market dynamics and without a concerted effort the problem will not resolve itself, says Betts. .“I truly believe a national strategy is not prudent, but rather a developer-by-developer, city-by-city, province-by-province strategy is critical and changes have to be made to ease the situation over time and overall,” he says. “As I've said before, in my opinion, the real estate market is changing dramatically and will not look the same in 24 months, nor will what people live in look the same.”.“I know one thing, governments want the people to believe they care about the problem, but they've seen it coming for five years and have listened to the wrong advice.”
