Canadas Rental Market Is Cooling Fast: CMHC Says Rents Are Falling, Vacancies Rising in Every Major City

Canada’s rental market is undergoing a dramatic transformation, and the country’s top housing agency has just provided the most comprehensive picture yet of what’s happening. The Canada Mortgage and Housing Corporation released its mid-year rental market update on June 9, 2026, and the data tells a story of a market that has fundamentally shifted from the tight conditions that defined Canadian rentals for years.

The Big Picture: Supply Meets Slowing Demand

For years, Canadian renters faced a brutal market. Vacancy rates hovered near historic lows, landlords had all the leverage, and rents climbed at double-digit rates in many cities. That era appears to be ending. The CMHC report makes one thing clear: increased supply and slower demand have eased asking rents, bringing Canada’s major rental markets toward more balanced conditions. But the story is far more complex than a simple nationwide decline, and understanding the nuances matters enormously for renters, investors, and policymakers alike.

The report identified several converging factors driving this shift. New purpose-built rental completions surged in early 2026, tracking well above the same period in 2025. But perhaps the most significant factor is a structural change that few predicted just two years ago: a massive wave of condominium apartments that could not be absorbed by the ownership market are now flooding into the rental sector instead.

This dual surge in supply has created genuine competition for tenants in markets that haven’t seen it since before the pandemic. In Toronto, Vancouver, Calgary and Ottawa, landlords are facing vacancies that can take months to fill for newer, higher-priced units. The incentives being offered would have been unthinkable in 2024: multiple months of waived rental fees, free or discounted parking, gift cards, move-in credits and even direct cash bonuses to attract tenants.

City-by-City Data: Where Rents Are Falling and Where They Are Not

The CMHC data reveals a market that is cooling unevenly across Canada. Toronto’s vacancy rate reached 3.0% in October 2025, the highest level since the pandemic began. Vancouver experienced an even more dramatic shift, with vacancies surging to 3.7% — its highest level since 1988, according to CMHC’s Rental Market Survey data. These numbers represent a fundamental reversal of the trend that had characterized Canadian rental markets for over a decade.

Montreal’s vacancy rate jumped 1.1 percentage points from October 2024 to October 2025, reaching 2.9%. Ottawa rose 0.7 points to 2.7%, Toronto increased 0.5 points to 3.0%, and Halifax went up 0.6 points to 2.7%. The national average vacancy rate for purpose-built apartments rose from 2.2% to 3.1% over the same period, while condo apartment vacancies increased from 1.0% to 1.3%.

However, the easing is not uniform. Halifax’s asking rents have begun to stabilize after previous declines, while Montreal and Edmonton showed little change in asking rents. Calgary and Edmonton maintained their vacancy rates at 3.3% and 3.4% respectively, reflecting strong population-driven demand from energy sector growth that offset the influx of new supply. This divergence is critical: the national average masks significant regional differences that matter enormously for anyone making decisions about where to live or invest.

The national average rent for a two-bedroom purpose-built apartment was $1,550 in October 2025, up 5.1% year-over-year but significantly slower than the double-digit increases seen in previous years. For condo apartments, the average two-bedroom rent was $2,305, reflecting the premium that comes with newer buildings and amenities in prime locations.

The Condo-to-Rental Pipeline: A Structural Shift

One of the most significant structural changes in Canada’s housing market is the growing pipeline of condominium apartments shifting from the ownership market to rentals. The CMHC report specifically highlighted this dynamic in Toronto and Vancouver, where a surge in new condo completions could not be absorbed by buyers.

The mechanics are straightforward but profound. Developers sold thousands of pre-construction condos over the past three years at prices that buyers could only afford with historically low mortgage rates. When rates stayed elevated and economic uncertainty increased, many buyers found themselves unable to close when their units were ready. Some could not secure mortgage approval. Others simply could not afford the payments at current rates. Rather than default, many chose to rent out their units instead.

This creates a unique situation where the rental market is being supplied by units that were never intended for long-term rental. The CMHC cautioned that this source of new supply will decline in coming years as condo apartment completions are projected to fall sharply. This means the current rental easing may be a temporary phenomenon rather than a permanent shift, and investors should not assume that the current supply glut will persist.

The Affordability Divide: Who Benefits and Who Does Not

Perhaps the most sobering finding in the CMHC report is that rental affordability is splitting sharply along income lines. Deputy chief economist Tania Bourassa-Ochoa noted that recent supply growth is improving choice for renters in some segments of the market, particularly among newer, more expensive units. However, persistently tight conditions in lower segments of the market highlight that affordability challenges remain and will take considerable time to address.

Vacancies were highest in structures built after 2020 and in units located near post-secondary institutions. Meanwhile, older stabilized buildings and family-sized units continue to experience tighter market conditions with lower vacancies and faster rent growth. This creates a paradox where luxury apartments sit empty while lower-income renters struggle to find anything affordable — a market failure that no amount of new supply in the high end can solve.

CMHC also noted that despite weak renter household formation and increased supply for available units, landlords are continuing to increase rents paid on occupied units as well as raising rents once a unit becomes available in markets with low turnover. This contributes to an increase in the average rents paid by all tenants, even as asking rents for newly available units decline. In other words, the renters who are already housed may see their payments increase while those looking for a place face more choice and potentially lower prices.

Looking Ahead: Rebound Expected but With Caveats

The CMHC forecast is cautiously optimistic. Despite weak population growth and elevated unemployment rates, the agency expects rental demand in major cities to rebound. Several factors are expected to drive this recovery: improving affordability for new tenants as rents ease, return-to-office trends that increase demand for urban rentals, and large cohorts of young adults seeking independence from their parents’ homes.

Notably, the report said easing housing costs are expected to support growth in Toronto and Vancouver specifically, enabling previously suppressed households to form. This is especially true amid economic uncertainty and lower costs compared to ownership, making renting a more attractive option than buying for many Canadians who would have purchased a home just a few years ago.

But the forecast carries significant warnings. The current supply glut is largely driven by condo completions that are expected to fall sharply in coming years. When that pipeline dries up, the market could swing back toward tighter conditions faster than anyone expects. Additionally, CMHC noted that the source of new supply from condominium apartments will decline as condo completions are projected to fall sharply, which could reverse the current easing trend.

The Historical Context: Why This Shift Matters

To understand the significance of the current rental market shift, it helps to look at where we came from. From 2021 through 2024, Canada’s rental market was defined by unprecedented tightness. Vacancy rates in major cities fell below 2%, meaning that for every 100 rental units, fewer than two were available. Landlords faced little competition and could raise rents with minimal pushback. The average rent for a two-bedroom apartment in Toronto climbed from approximately $1,800 in early 2021 to over $2,000 by mid-2024, with even sharper increases in cities like Vancouver and Calgary.

That environment was driven by a perfect storm: record immigration levels, low interest rates that pushed more people into renting rather than buying, and years of underbuilding during the pandemic when construction activity stalled. The CMHC’s current report marks a reversal of virtually all those factors simultaneously. Immigration has slowed, interest rates remain elevated, and construction has finally caught up with pent-up demand.

The question that matters for the future is whether this represents a permanent new equilibrium or a temporary correction. The CMHC’s own analysis suggests the latter: when condo completions decline in coming years, the supply advantage that currently benefits renters could evaporate quickly. Understanding this distinction is crucial for anyone making long-term decisions about renting, buying, or investing in Canadian real estate.

What This Means for Different Stakeholders

For renters currently searching, the message is clear: take advantage of this window. Landlords are offering incentives, there is more choice than you have seen in years, and you have negotiating power that may not last. For renters already housed, expect continued rent increases on your unit even as new supply eases pressure on asking rents for available units.

For investors, the picture is more complex. Purpose-built rental remains a solid long-term investment, particularly in cities with strong population growth. But condo rental supply could keep pressure on returns for the next couple of years, and the expected decline in new condo completions means that rental supply growth will slow considerably. Investors buying condos specifically for rental income should be conservative in their underwriting.

For policymakers, the report underscores that market solutions alone will not solve the affordability crisis for lower-income renters. The tight conditions in older, stabilized buildings and family-sized units require targeted interventions, as the current supply glut is concentrated in segments that do not serve those who need it most.