Why asking rents have surged in Canada since 2021

Renting has become significantly more expensive in Canada in recent years. Asking rents—those advertised for vacant units—rose sharply as demand grew faster than supply. As tenants move and sign new leases, changes in asking rents gradually spread to the average rents captured in the consumer price index.

About one‑third of Canadians are renters. But they are not all exposed to the same rental market conditions.

In many provinces, rent controls limit annual increases for existing tenants, but landlords can adjust rents more substantially when a new tenant moves into a unit. As a result, asking rents—the rents advertised for vacant units—can change much more quickly than the average rents paid by all tenants.

The speed at which average rents change depends largely on turnover, or the share of rental units that receive a new tenant in a given period. Because only a small fraction of units turn over each year, average rents tend to change slowly.

And this pace of change gets reflected in inflation. The rent component of the consumer price index (CPI‑rent) reflects the average rent paid by all tenants, not asking rents. As a result, changes in asking rents feed into CPI‑rent only gradually as new tenants move in.

Until recently, there was no reliable, timely source of information on asking rents. A new dataset by Statistics Canada fills that gap and provides a more comprehensive view of rental market conditions. Using these data, I examine:

• what has driven the sharp rise in asking rents since 2021
• why growth in asking rents differed across cities
• how changes in asking rents are transmitted to CPI‑rent over time

Strong population growth drove asking rents higher in recent years

The number of Canadian households has risen in recent years alongside strong population growth. That matters for rental markets because asking rents are partly determined by the balance between the number of households that would normally rent and the number of rental units available on the market. If the number of renter households increases faster than the supply of rental units, asking rents tend to rise.

Financing costs can also affect asking rents by raising borrowing costs for landlords with mortgages; these higher borrowing costs are typically passed on to tenants. Higher interest rates can also make it more costly to own a home, resulting in more Canadians renting instead. Financing and development costs can also affect supply over time by influencing the construction of new rental housing. Local factors, such as regulations and turnover rates, can also influence asking rents.

Since 2021, asking rents have surged nationally by more than 20%. What drove this increase? To find out, I estimate a panel regression on the year‑over‑year growth of asking rents in nine major cities from the first quarter of 2020 to the second quarter of 2026. Combining data across cities and over time provides a richer set of information than focusing on either dimension alone.

Specifically, I measure:

• changes in the number of renters, using an estimate of the renter households in each city that accounts for demographic differences in the likelihood of renting
• changes in the rental stock, using observed changes in the number of rental units in each city, including newly completed condominiums that are rented out
• changes in financing rates, using movements in the Bank of Canada’s policy interest rate
• city‑specific factors, capturing persistent local characteristics that influence rents but are not directly measured in the model
• unexplained factors, capturing movements in asking rents not accounted for by the other variables

As Chart 1 shows, asking rents surged between 2021 and 2024 mostly because of the sharp rise in demand for rental housing. This reflects strong population growth, particularly among groups that are more likely to rent, such as newcomers. Meanwhile, rental supply failed to keep pace, putting strong upward pressure on asking rents. Rising interest rates were another key reason for increases in asking rents over 2022 and 2023.

However, things have changed since mid‑2024. Population growth has slowed as the number of newcomers to Canada has declined sharply. Interest rates have also declined from their peak in 2023 and early 2024, their highest levels in two‑decades.

Canadians have experienced different increases in asking rents

Most of the surge occurred between late 2021 and late 2023 when asking rents rose sharply in nearly every major city, notably in Halifax, Québec and Calgary (Chart 2). Since then, growth in asking rents has slowed substantially. In some markets, such as Toronto and Vancouver, asking rents have even declined.

Local market conditions may help explain some of these regional differences. Previous research shows that the response of housing supply to increases in demand varies across cities. Regulations and other local constraints on development can limit the pace at which housing supply expands, causing demand pressures to translate mainly into higher asking rents. Toronto provides a recent example of the opposite dynamic. Asking rents in the city have declined since late 2023, partly because of the growing number of condo units available for rent.

These differences and recent developments matter most for households entering the rental market, a group that generally includes young Canadians and newcomers. Unlike existing tenants, these households must typically pay rents that are close to asking rents. Consequently, when asking rents increase rapidly, these households face the greatest affordability pressures.

Changes in asking rents are not immediately visible in CPI readings

The turnover in rental units shapes how quickly changes in asking rents appear in official inflation statistics. CPI‑rent measures the average rent paid by tenants while accounting for differences in the quality of their units. It does not measure the asking rents advertised for vacant units.

Because only a fraction of renters move each year, changes in asking rents feed through to CPI‑rent gradually over time (Chart 3). Nationally, the annual turnover rate is about 13%, though this varies across regions, ranging from 9% in Toronto to 29% in Edmonton. Regions with lower turnover rates typically see a longer lag between changes in asking rents and changes in average rents.

This lag matters for policy‑makers. Changes in asking rents can provide an early signal of inflationary pressures in rental markets before those pressures fully appear in CPI‑rent. Monitoring asking rents therefore offers a timely view of housing-related inflation dynamics.

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