Rental demand is rising, but rents are often just as expensive as mortgage payments
Canada’s housing crisis is keeping more aspiring homeowners in the rental market, as affordability challenges and supply shortages make it increasingly difficult to buy a home.
A new report from RE/MAX Canada showed how soaring home prices, tight lending requirements, and record-breaking population growth have locked many first-time buyers out of homeownership.
"Affordability remains, by far, the greatest barrier to homeownership from coast to coast," said RE/MAX Canada president Christopher Alexander. "With the average price of a home in most Canadian markets more than doubling between 2006 and 2021, first-time buyers are falling through the cracks.
“Rental rates that remain above historic levels, the high cost of living, and wages that have not kept pace with price growth pose a serious challenge to buyers hoping to amass a downpayment. It's near impossible for some buyers, even with steady, well-paying jobs. The dream of homeownership is eroding further and faster than their ability to save."
The report pointed to a range of factors driving this shift. Rising home prices, tougher mortgage qualification rules, and an ongoing supply shortage have made it harder for young Canadians to enter the housing market. At the same time, demand for rental housing has surged, keeping rental prices high and making it even more difficult for renters to save for a downpayment.
Why homeownership is slipping further out of reach
For many would-be buyers, the biggest hurdle is the lack of affordability. The OSFI (Office of the Superintendent of Financial Institutions) mortgage stress test, which requires borrowers to qualify at a rate two percentage points higher than the posted mortgage rate, has made it harder for buyers to secure financing. The test was introduced in 2018 to cool an overheated market, but Alexander said it has now outlived its usefulness.
"With the conditions that necessitated intervention no longer at play, the need for government to police prospective homebuyers is a duplication when banks and lending institutions already have mechanisms in place to do just that," he explained.
High development costs and municipal fees are also adding to the affordability crisis. In major cities like Toronto, Vancouver, and Hamilton, developers are facing record-high fees that make new housing projects more expensive to build. According to the Canada Home Builders' Association Municipal Benchmarking Study, Toronto’s development charges hit an all-time high of C$189,325 per unit in 2022, an increase of 21% from 2020.
Other cities have seen similar spikes:
- Hamilton: C$61,431 per unit (+49% since 2020)
- Vancouver: C$61,414 per unit (+29%)
- Ottawa: C$46,320 per unit (+11%)
- Calgary: C$42,800 per unit (+15%)
These rising costs, combined with restrictive zoning rules and slow approval processes, have discouraged builders from increasing housing supply, worsening the imbalance between supply and demand.
Rents keep climbing
As home prices continue to rise, more Canadians are choosing, or being forced, to rent. According to the January 2025 Rentals.ca-Urbanation Rent Report, the average national rent fell slightly to C$2,109 in December 2024, but rates remain historically high in most major cities.
- Vancouver: C$2,512 for a one-bedroom unit (most expensive in Canada)
- Toronto: C$2,360
- Halifax: C$2,030
- Ottawa: C$2,012
- Hamilton: C$1,723
- Calgary: C$1,606
In many cases, renting is just as expensive as owning. Ratehub.ca estimated that carrying a C$600,000 home in the Greater Toronto Area (based on a 10% downpayment and a 4.1% five-year fixed rate) would cost around C$2,665 per month – only slightly more than the cost of renting a one-bedroom apartment.
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"Those hoping to enter the housing market for the first time have been caught in the middle, unable to afford to buy, as they continue to rent at rates that are on par with mortgage carrying costs in many cities," the report stated.
Population growth surge
Canada’s record-breaking population growth has only added to the housing crunch. Between 2006 and 2021, the country’s population grew 17.4%, adding 5.67 million residents. Growth was particularly strong in major metropolitan areas:
- Calgary: +36.8% (414,693 new residents)
- Vancouver: +26.5% (581,381)
- Ottawa-Gatineau: +26% (244,058)
- Toronto: +21.3% (1,136,564)
- Halifax: +18.2% (74,369)
- Hamilton: +13.6% (98,138)
"If you factor in the accelerated growth between 2021 and 2024, when further double-digit population increases were recorded in Vancouver, Calgary, Ottawa, Toronto, Hamilton, and Halifax, the strain on the Canadian housing market is palpable, and the pressure is not expected to ease," said Alexander.
Statistics Canada projected that Canada’s population could reach 52.5 million by 2050, which means housing shortages are likely to persist unless major policy changes are made.
Can policy fix housing crisis?
While housing affordability has been a growing issue for years, the report argues that past policy decisions have made it harder, not easier, for first-time buyers to enter the market.
In 2006, CMHC relaxed mortgage rules, allowing 40-year amortizations, zero downpayment mortgages, and interest-only loans. The result? A record-breaking housing market in 2007. However, by 2012, the federal government had begun rolling back these incentives, introducing tougher lending restrictions that have made homeownership less accessible ever since.
Toronto remains the only Canadian city with a double land transfer tax, adding thousands of dollars to the cost of purchasing a home. Other cities, including Halifax and Hamilton, have considered introducing similar taxes. Meanwhile, Calgary continues to see strong migration due to its more affordable housing market and lack of a land transfer tax at either the municipal or provincial level.
As affordability worsens and homeownership becomes more elusive, RE/MAX Canada warns that Canada may be shifting toward a permanent rental culture – a sharp contrast to the country’s long-standing emphasis on homeownership.
Without urgent action on housing supply, development costs, and mortgage qualification rules, first-time buyers will continue to struggle to break into the market, and rental demand will remain at record highs.
"The dream of homeownership is eroding further and faster than their ability to save," said Alexander. "It's near impossible for some buyers, even with steady, well-paying jobs."
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